Opinion: Olly Newland says building reasonably priced housing is a dying business, strangled by regulation. Your view?

Posted in Property May 10, 2012 - 08:12am, Olly Newland

'The Tax Gatherer' 1540 - Marinus Van Reymerswaele

By Olly Newland

Olly Newland Almost on a daily basis websites are full of angry people accusing ‘speculators’ of ramping up the price of property - supposedly pushing it out of reach for ‘the poor’ and first home buyers.

‘Bring in a Capital Gains Tax!’ is the cry, or there are calls to ‘restrict’ lending for property purchases, or to ‘punish’ investors by removing tax advantages, or to flood the market with more undeveloped land.

Some even want the government to tax gains that have not even been realised.

This cacophony of shrill envy aimed towards property investors is almost exclusively driven by those who cannot comprehend this market reality: where someone has actually taken the plunge, bought a property of some kind and then - whether immediately or over time - made a profit.

However let me tell you that it’s not ‘speculators’ who are driving up the price of property. Indeed, they are more likely driving *down* the price of property! For speculators can only really thrive by fierce haggling in order to buy at bargain prices.

No, the real culprits who are driving up prices are the Local authorities: Councils and quasi-council organisations and all their hanger-ons whose habit of profligate spending requires ever more income. As a consequence, outrageous charges have to foisted on the consumer in order to keep the money rolling in.

The public is more openly critical than ever. Mini ‘revolutions’ have already started. They will get more frequent no doubt, especially in these straightened times.

279 Comments

by scarfie | 10 May 12, 9:08am

"Almost on a daily basis

"Almost on a daily basis websites are full of angry people accusing ‘speculators’ of ramping up the price of property - supposedly pushing it out of reach for ‘the poor’ and first home buyers."

That is because they are Olly. If there was no ability to leverage into property (borrow leveraged money to purchase) then there would not be a bubble. While there is some truth in what you say about councils the rest of your article is really just noise, designed to redirect from and obfuscate the real issue.

by notaneconomist | 10 May 12, 12:22pm

Scarfie, I am not sure I can

Scarfie, I am not sure I can agree with your comments. Leverage on property has taken the blame for increasing home prices and causing the housing bubble. However a value on a property is the first fundamental that needs to be taken care of. Property has been valued on what people are prepared to pay and as long as the borrower could afford the interest payment along with any principle payments required by the lender the bank rubber stamped the deal.
Immigration, working for families income supplements, taxation and keeping up with the Jones has played a significant role in the housing bubble.

by scarfie | 10 May 12, 2:37pm

Look the fraudulent money

Look the fraudulent money supply affects all those other things as well, so indirectly it is the same cause, although immigration perhaps not.

"Property has been valued on what people are prepared to pay and as long as the borrower could afford the interest payment along with any principle payments required by the lender the bank rubber stamped the deal." Well yes but this requires people to be ingnorant of the fraudulent nature of our money and the effect their borrowing has on the money supply. It all hinges around that point of borrowing and that is my interest in commenting here, getting people to think about what money is, where it originates and where it comes from. I come down hard on property investors because they are generally aware of some of these issues but still choose to take advantage.

Think about this. When money is created bearing interest, the mere fact of paying the interest subtracts from the money in circulation. Not only does more money have to be introduced to cater for the interest, but the same amount again to preserve match production. If you expect growth then that means more money on top of that again. I have modeled it and you will at some point see the money supply go parabolic.

by notaneconomist | 10 May 12, 5:30pm

The shortage of money in your

The shortage of money in your above reply creates the credit crisis which Govt's then solve by more of the same measures that created the problems in the first place.
I agree the valuations "require people to be ignorant of the fraudulent nature of our money supply and the effect their borrowing has on the money supply". People were buying houses in under 24 hours - that is extremely ignorant. Did these people have time to do any due diligence? - not likey. Everyone that was buying was telling me it didn't matter what they paid as they would accept the annual capital gain and they wouldn't have to pay tax on that.
Taking issue with property investors because they were aware and took advantage of the system is unhelpful as they were compliant with legislative processes at the time. I would like to get some members of our society to also think about "what money is, where it originates and where it comes from" as maybe then the Govt and its cronies would shrink in size and we would all be better off.

by scarfie | 10 May 12, 6:22pm

I will take you as sincere

I will take you as sincere when you say this "Taking issue with property investors because they were aware and took advantage of the system is unhelpful as they were compliant with legislative processes at the time". Just because something is lawful doesn't mean it is moral. What happens when the law maker/s have dishonest intentions? Seems to be the case with the money supply.

Think about this as an extreme case. Hilter made exterminating Jews lawful, policy in fact, so does this mean that everyone following orders in doing so should have been exonerated?

I can assure you it is the same sort of thinking that is applicable to property investment, no consideration of the victims.

by notaneconomist | 10 May 12, 7:29pm

Using the case of Hitler

Using the case of Hitler legalising genocide against the Jews as part of your argument is rediculous as is exonerating those who committed such crimes
Thinking Property investors have made victims out of some members of our society is also rediculous. The world revolves around business in the supply and demand of goods that is an inescapable reality. All business has to take opportunity, risk, failure and much more.
Do you not believe in people gaining reward for their efforts? The supply of houses to those who need housing is something we should appreciate. The property investors fill the demand of other peoples needs. If no landlords or property investors existed people would not have the ability to move locations so easily such as when you go to Uni, get your house trashed in an earthquake, relocate town/city for work or simply don't want to take on the perceived risk of buying etc. Everyone who purchases property should be perceived as a property investor as housing should be an investment whether you are living in it or renting it out.

by scarfie | 10 May 12, 7:41pm

Sorry no, the analogy is

Sorry no, the analogy is quite correct. It is not the outcome but the intent that is important. In fact the outcome could be much worse if you think about it. As for motivation the Nazi's saw nothing wrong with the priciple of racial purity, albeit completely misguided.

Please explain what effort a property investor exerts to justify a reward? Seems to me they do nothing at all except borrow money, money that is freely created. The risk is very low once you understand the money supply, a guaranteed income at the expense of others if you stick to postive yielding property.

Filling the needs of others is a fallacy. If anything it is the developer and the builder that provide that service. If investors worked solely of savings they could be forgiven in part, but they generally don't.

by Chris_J | 10 May 12, 9:12pm

Don't listen to scarfie. He

Don't listen to scarfie. He is seriously deluded on this issue.

by scarfie | 10 May 12, 9:24pm

Done that IQ test yet Chris?

Done that IQ test yet Chris? or still avoiding showing your deficiency?

by Chris_J | 10 May 12, 10:44pm

Are you eight years old

Are you eight years old scarfie?

Seems a bit childish.

by scarfie | 10 May 12, 11:10pm

It it your juvenile and

It it your juvenile and fallacious comments that lead to that challenge Chris. You are free to label others stupid or worse, indicating you think you are more intelligent. Prove it buddy. Put up or shut up.

You won't because you can't.

by Chris_J | 11 May 12, 12:02am

Boy oh boy, scarfie. If I

Boy oh boy, scarfie.

If I am free to label you as the aforementioned, sobeit I will!

(Anyway I reckon I have adequately determined your IQ level from our previous exchanges - but if you feel the need to let the world know all of your deficiencies - feel free to continue)

by Hard worker | 11 May 12, 11:03am

Scarfie makes sense, theres a

Scarfie makes sense, theres a movie about him called The Dictator coming out soon.

by notaneconomist | 17 May 12, 8:16am

Your'e question "Please

Your'e question "Please explain what effort a property investor exerts to justify a reward? is indicating that you don't know what effort is required of a property investor. Property investment is just the same as any other business type and requires an enormous amount of effort.
Property investors, Speculators, Property Developers and non-Investment Property Owners all play completely different roles within the property market. Property Investors and Property Developers have a legitimate business model with all the hassels of business and compliance on an on going basis.
Speculators and non-Investment Property Owners are probably the worse players in the market. The speculator is always "hoping" the price increases as this is their keep out of mortgage default card, while non-Investment Property Owners tend to value property from a very different perspective which often has little to do with actual value and returns obtainable in the true market place.
I am having difficulty following your statement "The risk is very low once you understand the money supply, a guaranteed income at the expense of others if you stick to postive yielding property". Everyone has the ability to resource themselves from the same money supply so everyone has the same risk. Any investment should provide a return or else it is not an investment - it is a liability. In recent years positive yielding property has been difficult to find and generally has required some form of capital input from the purchaser. There is no return off this portion of capital injection until the property has become postive yielding.

Property investment is no different from any other business. The cashflow just happens to come from housing stock. There is no difference between housing stock, livestock, coffee stock, education stock etc they are all used for the purpose of generating an income higher than costs.

To strike out at property investors as you believe their intentions are immoral on some level is quite dispicable and could be in breach of human rights. Property Investors use the same money supply as everyone else. If you buy a coffee or eat out I bet the business has a debt. Well that debt came from the money supply chain, along with student loans and every other kind of debt. So by your thinking everyone is immoral - as you will be a consumer of goods on a daily basis you are also part of the problem as much of what you consume will have a debt behind it somewhere.

While I understand your concern for HOW THE MONEY SUPPLY IS CREATED we also have this thing called democracy which allows each person a vote and NZ has continually voted for the money system that is in place. I have only seen one alternative to the creation of the money supply and that is from the Democrats for Social Credit. I am sure you have your own views and agend on how the money supply should be created/controlled and wouldn't a better more productive use of your time be in showing others how the alternatives to the money supply will work instead of criticising one business sector who requires capital.

by scarfie | 17 May 12, 9:39am

Oh I know full well what is

Oh I know full well what is involved of a property investor(unwittingly got caught as a landlord), but that and other points you make doesn't change the fact that it is non productive. There is a world of difference between the business owner or home owner that uses the fraudulent money to facilitate production or a home to that of an investor that makes money from money itself. Property investment is little different to putting money in the bank on interest, then leveraging that at 36:1 by borrowing from the bank at a wholesale rate and loaning it to them at a retail rate. Agree re speculators being the worst.

Yes everybody does have access to the same source of money, but not everyone takes possession of it with the intent of profit. It is the intent that is different and I suggest you concentrate on that aspect, as intent is the defining point of almost all criminal offences(manslaughter and receiving are a couple of exceptions). Tell me where money by definition should be a source of profit?

Have you seen my modification of the quantity theory of money? (M.V)+i=P.Q , where 'i' is interest. Until I created that equation I thought that fiat money and fractional reserve banking were the evils, but it turns out interest is main one. Of course the former two faciliate the later. Interest only works when there is a constant surplus to pay it, but it becomes a ponzi scheme as the interest component keep growing as a percentage of the total money supply and eventually the new inputs can't keep up. We are staring down the face of a double barrel as our money supply is nearing the end of its natural life span. The inflexion point in the population graph in 1961 means the rate of growth is declining and will soon turn negative. Interest rates will have to turn negative from that point. The question is why ? What has caused the slowing of growth? Peak resources seems a logical conclusion to make. Debasing the money supply was a natural progression from this condition IMO.

Be careful when you say capital, because you know it isn't:-P But otherwise I try to drop in the terms 'fiat' or 'fractional reserve' with the intent that if even one person who reads it starts to investigate then it is a success. When they find out for themselves the loud protests from some quarters will make sense. I don't presume to know the answer to what will work BTW, it is enough of a responsibility in trying to design someones dwelling.

by Augusta Funds Mgt | 10 May 12, 4:29pm

Scarfie, how does a bubble

Scarfie, how does a bubble exist in an environment where credit growth has been negative, and prices are at roughly the same levels that they were at 5 years ago?
Furthermore, if leverage was not available, it would affect everyone in the same way. Prices may well be lower, but first home buyers would have no access to leverage making home ownership even more unaffordable than it is today.

by scarfie | 10 May 12, 6:14pm

That is tripe and I think you

That is tripe and I think you know it. You have got to be kidding me trying to defend leverage, civilistation existed quite happily for thousands of years without it.

Misallocation of resources is your answer. When you have a system of rules that favour one asset class over another, which housing has an almost exclusive over via allowing you to borrow leveraged money, then that asset will be highly attractive. Too damn attractive for the greedy bastards out there to resist, people like property investors. Simple greed faciliated by some beneficial rules, that is all it is.

It is a moral and ethical issue as much as a monetary. Those that created the monetary system understand human nature only too well and have stimulated the greed emotion very very well.

(edit: why do you think we have moved from single income families to two? Mortgage terms have extended over the same period of time. It is no coincidence that these have taken place since we went off the gold standard, or though that isn't the only issue)

by Chris_J | 10 May 12, 10:31pm

Really? You do know banks

Really? You do know banks (and individuals) have been lending money on houses for hundreds of years!

http://paperspast.natlib.govt.nz/cgi-bin/paperspast?a=d&cl=search&d=NZGW...

That's an ad from one of NZ's first newspaper editions in 1842.

Leverage is nothing new.

Nor are banking failures (look at the banking collapses in the 1890s including the Colonial Bank of New Zealand).

by scarfie | 10 May 12, 11:06pm

I said thousands, not

I said thousands, not hundreds. I am quite aware that fractional reserve banking made its appearance well before NZ was colonised. So did Maori have a central bank? Or practice modern banking? Or were able to borrow money to build Whare? According clowns like you they would have suffered a housing shortage. Short sighted and well short of an argument as usual.

by Chris_J | 11 May 12, 12:37am

So by scarfie's reckoning the

So by scarfie's reckoning the whole basis of modern civilisation is corrupt and fraudulent!!!

What did I say previously? I think we've now caught the biggest loon in town!!

And so the Ancient Romans and Greeks didn't have money or lend money or mortgage assets???? Check your history and I think you'll find they did! Or perhaps pop down to your local stamp and coin shop and you may even find some of that money that the Romans never lent or spent!!!!

Obviously you never read the annals of Publius Cornelius Tacitus (56-117AD) [Book 6.17]
Hinc inopia rei nummariae, commoto simul omnium aere alieno, et quia tot damnatis bonisque eorum divenditis signatum argentum fisco vel aerario attinebatur. ad hoc senatus praescripserat, duas quisque faenoris partis in agris per Italiam conlocaret. sed creditores in solidum appellabant nec decorum appellatis minuere fidem. ita primo concursatio et preces, dein strepere praetoris tribunal, eaque quae remedio quaesita, venditio et emptio, in contrarium mutari quia faeneratores omnem pecuniam mercandis agris condiderant. copiam vendendi secuta vilitate, quanto quis obaeratior, aegrius distrahebant, multique fortunis provolvebantur; eversio rei familiaris dignitatem ac famam praeceps dabat, donec tulit opem Caesar disposito per mensas milies sestertio factaque mutuandi copia sine usuris per triennium, si debitor populo in duplum praediis cavisset. sic refecta fides et paulatim privati quoque creditores reperti. neque emptio agrorum exercita ad formam senatus consulti, acribus, ut ferme talia, initiis, incurioso fine.
Hence followed a scarcity of money, a great shock being given to all credit, the current coin too, in consequence of the conviction of so many persons and the sale of their property, being locked up in the imperial treasury or the public exchequer. To meet this, the Senate had directed that every creditor should have two-thirds his capital secured on estates in Italy. Creditors however were suing for payment in full, and it was not respectable for persons when sued to break faith. So, at first, there were clamorous meetings and importunate entreaties; then noisy applications to the praetor's court. And the very device intended as a remedy, the sale and purchase of estates, proved the contrary, as the usurers had hoarded up all their money for buying land. The facilities for selling were followed by a fall of prices, and the deeper a man was in debt, the more reluctantly did he part with his property, and many were utterly ruined. The destruction of private wealth precipitated the fall of rank and reputation, till at last the emperor interposed his aid by distributing throughout the banks a hundred million sesterces, and allowing freedom to borrow without interest for three years, provided the borrower gave security to the State in land to double the amount. Credit was thus restored, and gradually private lenders were found. The purchase too of estates was not carried out according to the letter of the Senate's decree, rigour at the outset, as usual with such matters, becoming negligence in the end.
http://classics.mit.edu/Tacitus/annals.6.vi.html

And you thought quantitative easing was a new idea!!!!
Get with it scarfie! You are just plain old fashioned loony.

by scarfie | 11 May 12, 11:32am

As usual your diatribe

As usual your diatribe contributes nothing to the argument, although I commend you on taking that step towards actually doing some research for your posts.

AFM states that leverage (fractional reserve banking) is essential for the housing market to work. "Furthermore, if leverage was not available, it would affect everyone in the same way. Prices may well be lower, but first home buyers would have no access to leverage making home ownership even more unaffordable than it is today."

I called this as tribe and you haven't actually contested that.

by Chris_J | 11 May 12, 10:05pm

So 2000 years of lending on

So 2000 years of lending on houses in civilisations not based on subsistence in grass huts isn't enough for you??

Loon, loon, loon, loon, loon... Yes I think you are a loon!

by scarfie | 13 May 12, 3:12pm

Thinking? The concept is

Thinking? The concept is completely foreign to you.

And again, the conversation is about fractional reserve lending. But lets not let a basic concept like sticking to the argument prevent you from calling on the best of your vocabulary. So is your technique in the hope that if you repeat it enough it might come true?

by Gummy Bear Hero | 13 May 12, 6:36pm

...... and there I was ,

...... and there I was , sailing along through life , happy in the knowledge that a loon is a North American aquatic bird , from the genus Gavia ......

No one told me that it was a scarfie too ! ...... we live and loon ......

by scarfie | 13 May 12, 6:39pm

Whats more, a flock of

Whats more, a flock of Scarfie's as well...

by Gummy Bear Hero | 13 May 12, 6:46pm

....... flocking hell !

by mist42nz | 13 May 12, 3:51pm

Perhaps they should have

Perhaps they should have locked back to a Gold Standard :) :)

IIRC this was nearer the end of the growth of the Empire. Neighbouring lands had been conquered and their wealth stripped and brought home to Rome. A steady supply of indentured slaves had been occurring, but about this time the Empire was maturing in their own market. Rich people were spending large amounts on opulence and buying favours, protecting their interests politically, rather than spending to increase productivity or service.

The result being those in the pot were too busy trying to stay their (fiddling away).
Outlying services becoming poorer and less able to support burdens placed upon them.

The wealth in the certain circles led to decadence. desperation and despair elsewhere leading to shortcuts in law. Resulting in the declination of the markets' ability to support itself. The authorities then turned on the people imposing draconian standards to try and control them and to support their [private lenders] livestyles, resulting in the collapse.
Nice to know the writing was already on the wall.

by scarfie | 13 May 12, 6:01pm

Quite interesting how two

Quite interesting how two people can look at the same evidence and draw completely different information from it. I guess that is a reflection of the original behaviour :-) Being repeated :-P

by mist42nz | 13 May 12, 9:01pm

Admittedly it was from memory

Admittedly it was from memory [of reading about it :) ] and things were already decaying be the time Tiberius was elevated to Godhood. I was trying hard to remember the context in both microcosm (the actions of the people and the merchants, the latter often a good indicator of the health of an economy) and the macrocosm (how and what history recorded as changes about this period). That way when the models are compared, the fit can be tested, and hopefully the flows properly accounted for. That lets the Chaotic elements stand out for observation.

But Rome is a good example for the modern world - Rome being historic and well recorded and one of the first Consumer Cities (as opposed to more Imperial Estate, which is what the Egyptian and Persian ones were. ie far more by decree). Where Rome was originally a bunch of bandits who did well, and the Empire was in effect a Globalisation of the world around it (free trade, competition, information, liberal laws).

As for banking. The existance of those with larger resources or influence to assist others, for return of favours or to futher their own aims, is older than civilisation itself. If "the government" of the day, did not exploint this Families would. (as shown by the rise of the Medici and other families of Florence, that started the Renaissance)

by Gummy Bear Hero | 13 May 12, 6:55pm

The Gummster wonders how much

The Gummster wonders how much the price of houses would pull back if all the government interference was removed ( rental subsidies , state houses , tax breaks , etc ) .......

...... here in Oz the John Howard government added fuel to the roaring house prices , with the first home buyers grant ....... which just served to push prices even further from affordability ....

It boggles me tiny mind that governments allow us tax breaks on housing debt ; but punish savers by taxing them heavily on the interest earnt on their cash deposits .

by mist42nz | 13 May 12, 8:29pm

To have any effect it must

To have any effect it must put pressure on the market. It must soften the top of the market in favour of the buyers.
This is why I give the "experts" a hard time on the basics and assupmtions. Giving grants to buyers doesn't soften the top for buyers (let them drive it downwards) ... it softens it for sellers (letting them lift their prices) and puts bigger [longer term] debts in range for the buyers.

If they were trying to push down the prices this is exactly the wrong thing to do.
To push it down they have to harden the ceiling for buyers (more entrance equity) and soften the price downwards for sellers (give them reasons to sell for less - either more competition or subsidise).
However such plans will -always- open the market for those who have already developed a resource base. Heck, taking advantage of a buyers market is the -reason- for building a resource in the first place!

Thus if they really want to encourage first home buyers over others in the market, they must create a hard ceiling on price, create a buyer market, and give a reason for sellers to prefer first-time buyers over more secure purchasers. Which pretty much means rebates to sellers after the deal.
This will create speculation (as it effectively lifts the sell price to a niche) but that can be reduced by imposing time limits and/or capital tax - as I see no reason not to income/capital tax on direct speculation. Speculation adds value by deepening the market (ie providing buyers who will buy now and carry the asset over time until a seller is ready) but it's still trading income like any business. And shouldn't be prevented as a deep market is healthier than a thin one, and having someone ready to buy and sell - that is within the limits - is always good.

Also there is no reason why larger property owners shouldn't be asked to provide larger % equity (rather than at the moment, they get asked for less as they're less risky/more diverse). But as the finance houses have shown bigger isn't always better or safer. Personally I'd like to see the Statute minimum loan equity requirements lifted for 3, 4, 5 etc properties. Such an operation slows the [debt] chase and increases the reserve holdings should the dominoes shift. In fact this was one of Crafars failures, he could "double down" on minimal equity, which increased revenue, but actually increased risk (especially to "leakage") exponentially - but because each new expansion spread him that much thinner, and gave him exposure on more points (like the home insurer companies in Christchurch), his actual revenue stream was less well protected. (hidden risk - as when the farms were working the risk wasn't apparant, but when examined it was only operational because of lack of immediate challenges - when the challenges occurred eg sick staff, or for insurers a large effect disaster there was nothing to fall back on. and it's not like these disasters were outliners/complex/freak occurences)

by keriwin | 10 May 12, 9:14am

Olly, you are so right. Up

Olly, you are so right. Up here in Kerikeri 4 years ago I subdivided 2 sections off my 21 acre property, resource consent and surveyors fees cost $60K. I planted both sections out with hundreds of trees to make them nice private 1 acre lots. The conditions placed on me by council, GST etc at the time meant that selling the sections would mean I would have to sell them for 160K just to recover the money spent(that is the price of sections up here), this does not include the loss of value of the existing property. I would have liked to self build 2 houses to sell but the sums just do not add up. To rub salt into the wounds the resource consent is expiring soon so to renew it will cost another 4K and I was told I must hire a landscape architect to draw up the plantings on the sections , telling you what trees to plant. Please please Olly use your influence to save us all from this madness.

by Kate | 10 May 12, 9:29am

Why would the subdivision

Why would the subdivision consents have an expiration date?

by keriwin | 10 May 12, 9:39am

Because they want you to

Because they want you to build within a certain timeframe, ignoring the situatiion we have here in NZ where sections cant be sold because buyers wont /cant buy at the price needed to make it viable to sell. A cynic might say it is a good way a getting more money in to pay for axcessive staffing.

by Kate | 10 May 12, 10:10am

Surely you don't have to

Surely you don't have to build a dwelling on the property within a certain timeframe - you just have to complete the subdivision process - ending with lodgement of the new titles (for bare land) with LINZ?

I'm guessing that you might have been relying on the proceeds of selling the subdivided land to finance completion of the subdivision - I assume that's what most ads which state 'subject to title' are attempting to do.

If so, I understand it's quite common that those type of development plans never get off the ground. I would hope that the council folk and/or your lawyer might have cautioned you in this regard.

by David B | 10 May 12, 1:02pm

What a lot of weasel words.

by PhilBest | 10 May 12, 4:07pm

Consider yourself told off,

Consider yourself told off, Keriwin. How dare you want to make a living. Don't you know you are meant to hold land for years at your own finance costs while you wait for bureaucracies to get their a into g - also at your cost?

by Kate | 10 May 12, 5:07pm

... while you wait for

... while you wait for bureaucracies to get their a into g ...

Looks to me that the council got it's "a into g" - as Keriwin has a subdivision consent - in fact it looks like that consent was granted nearly four years ago!

I doubt it's the council holding up the transaction being completed.

Happy to be corrected if Keriwin drops back in.

Also happy to stand corrected if indeed one has to build something on the land inside the four year timeframe in order to complete the land transfer transaction.

by keriwin | 10 May 12, 5:10pm

With two children as lawyers

With two children as lawyers I hope so. I could get titles for another $100,000 but what is the point if I can't make any money on the deal.

by Kate | 10 May 12, 5:17pm

But you said sections go for

But you said sections go for $160K (and you'd have two) - so what's the problem?

by keriwin | 11 May 12, 11:23am

Yes but when you get title

Yes but when you get title you have to pay all sorts of council contributions. And don't forget the loss of value to the existing property.
The only way I could make money is if I built two houses myself. I am a retired engineer and used to make prototype cars accurate to 15/1000 of an inch so have all the skills to do the job, however due to the new rules I would have to pay an inferior skilled person to do the job. I have a letter from the minister on this and it says "no leaky homes have been built by self build owners".

by bob | 13 May 12, 6:46pm

Any chance you could provide

Any chance you could provide link to copy of that letter? With contact details obscured (other than ministers) is fine. Letters where minister make blatanty incorrect statements can be very useful in certain situations. Thanks

by MortgageBelt | 10 May 12, 9:17am

You really can't build

You really can't build anything new & complete in a reasonable suburb - even in the PRovinces for less than $550k. $200k section, new build $350k.

by powerdownkiwi | 10 May 12, 9:28pm

Mortgage-Belt- one word;

Mortgage-Belt- one word; bollocks.

Been there, proven you wrong.

Vested interest in interest, methinks.

by PhilBest | 11 May 12, 4:26pm

PDK, I am with you on the

PDK, I am with you on the potential low cost of the building.
That is your specialty, and I admire it.
My specialty is the cost of the land, and the reasons why it inflates in value several hundred percent just because of urban planning. I wish you would recognise this factor as well.
There is a massive difference in affordability between a PDK $80,000 house on a $200,000 section, and a PDK $80,000 house on a $50,000 section.

by robby217 | 13 May 12, 12:04am

Yes thats what I don't get

Yes thats what I don't get about pdk, energy efficient homes and building, nobody is going to argue with that.
Overpriced land costs due to silly council processes, building regs etc etc. Ironically some of that is preventing the types of homes pdk advocates - as people/companies are less able to experiment. I can't see why home building/design isn't basically on a reputational basis, perhaps with a few provisions to ensure builders can't escape shoddy work via limited liability provisions.
Perhaps pdk is the one with vested interest and pdk actually stands for "property developer kilmog" area.

by mist42nz | 13 May 12, 7:21pm

The shoddy builder thing runs

The shoddy builder thing runs into the problem of the builder possibly doesn't have enough assets to claim against, especially given the cost of pursuing it (by individual property owners). Of course, there could be enforced builder insurance, but such things must be paid for and thus add to the already sizeable non-value-add portions of the work.
Thus it is good to go for builders who have reputation but they can be expensive or busy or just as slack as a cowboy (but with better spin protection).
Another option is to get your own builder insurance but insurance companies in NZ tend to be "box droppers" in that you get to take what they have and that's it, no room for non-boilerplate negoitation.. and even more importantly (especially as IAG seem to own most the major insurers) they are utter bollocks when it actually comes to paying out on claims.

by ngakonui gold | 10 May 12, 9:38am

having only completed 3 years

having only completed 3 years at college i could be wrong but i think that the GST component on a house would somehow escalate the building costs
if i import the timber then onsell it plus gst to a building and he onsells it to a builder plus gst and then he onsells it to aperson building a house plus gst and this continues with every aspect of building a house then GST in my calculations would be approx 45%
I could be wrong

by keriwin | 10 May 12, 9:41am

Check the price of timber

Check the price of timber elsewhere. We are being ripped off.

by Chris_J | 10 May 12, 9:52am

You are wrong. Any party

You are wrong.

Any party registered for GST can claim back any GST paid, so GST is only paid once (on the final price a product or service is sold for).

by pouggey | 10 May 12, 10:06am

No, the GST is 15%. Say

No, the GST is 15%. Say everyone puts a markup on of 30%. You buy the timber for $100. You onsell it for ($100 + 30%) = $130 +GST (which you collect and pass on the the IRD). The buyer onsells it to a builder for ($130 + 30%) = $170 +GST (which he collects and passes on the the IRD). The builder sells it to the customer for ($170 + 30%) = $220 +GST = $253. So the GST is $33; the rest ($120) is profits by all the middle people.
Cheers

by mist42nz | 10 May 12, 11:54am

pougey do you seriously think

pougey do you seriously think a NZ business can survive on a 30% margin (over bse resource cost) ?

by rastus | 10 May 12, 10:59am

...you forgot the part where

...you forgot the part where the buyer claiims the gst back...hence the gst merley gets passed along until the final stage..ie the non registered end user

by mist42nz | 10 May 12, 12:12pm

YEs the middlepeople can

YEs the middlepeople can cliamed back what they paid in GST. But if they are making a profit, each middleperson contributes GST on their margin, to teh IRD,

And the final consumer pays GST on the Final ticket price.

One middle person pays GST on the sale, but that value is discounted off the next persons because of the purchase already had GST paid on it. So it inflates the cost of the product by GST rate. But it also reduces the gross profit (eg margins) for each business person, by GST times their spread - because they pay gst on the difference). Considering that some rare business use a "cost+" way of calculating sale prices it seriously impacts of their economic value.

However GST (especially based on payments) is on of the easiest things to calculate!
1 Take receipts and payments list (usually a bank statement),
2 Remove all non-relevant transactions (loans/loan repayments, financial fees/interest, wages, forex, non-business related transactions),
3 Remove all zero-rated entries (a little harder, secondhand stuff, foreign trades),
4 add up the payments,
5 add up the receipts,
6 apply the current tax rate to (4) and (5)
7 apply a couple of adjustments from the adjustments sheet if necessary
8 the difference between the two results is the tax (more sales) or refund (more expenses)
Very easy.

by pouggey | 10 May 12, 2:59pm

In my view the GST is a

In my view the GST is a completely separate entity - it can be ignored in all calculations.

The point I was trying to make is you don't pay GST on GST. I.e. GST is 15%, not 45% or whatever.
So the final price is original price plus margins by middle persons - excluding GST which is paid only (and not claimed back) by the end consumer. It's only the margins that increase the price at each step; not the GST. The margins don't get added to the inclusive-of-GST amount (not in a business-to-business environment anyway - retail may be different?).
Cheers

by mist42nz | 10 May 12, 10:25pm

I know what you'e saying but

I know what you'e saying but you can take my word for it, as person in business and that handles accounting information, GST CAN'T be ignored and yeah, unfortunately the net effect is you end up paying GST on GST - just not 45%

The price is the market price.
The seller loses the GST to the government, so must take a smaller price (or bank loans are higher).
But the seller must make purchases. from their own funds. So they have to figure that overhead into cashflow. But they only lose GST on their own margin - but that is still a cost to their business, and since many NZ business are deeply indebted and already operating skeleton levels it does affect their ability to pay decent wages and how much they can afford to pay for expenses and product (especially for development) .
My next GST cycle, for example, I lose $20,000 to government, less purchases of $5000. That 15k that my customers have to front up with, that I have to budget and service for.
ie I have to know there's 20k in the bank; and I have already spent $5000 more than the actual stock and inventory costs than the value of what I brought - and have to carry that loss (and pay interest on it) until I can get a credit. Of course, the sales credit does help, because I use in a "TotalMoney" account to offset my loans but in doing so I have to keep those funds liquid - despite IRD and banks who can fiddle with it - and being careful not to mistake it for my own funds, thus accidentally plunging myself into insolvency!

by rastus | 10 May 12, 11:00am

.

by Chris_J | 10 May 12, 9:55am

Excellent work Olly. It is

Excellent work Olly.

It is local and central government responsible entirely for the price of housing and the lack of supply.

Would it hurt the state to sell 1000 houses a year in Central Auckland where wealthy people want to live (which would regenerate the ghettos) and build brand new better quality housing on the fringes for less? This work create building work and employment plus increase the supply of houses for renovation and redevelopment in the Central Auckland suburbs.

by doublegz | 10 May 12, 6:22pm

Correction Chris_J: Central

Correction Chris_J: Central Auckland suburbs do not include Eastern Suburbs. Thanks.

by Chris_J | 10 May 12, 9:19pm

Oh don't feel too depressed

Oh don't feel too depressed doublegz - stuck out their in the eastern Auckland ghettos.

Maybe if uncle John sold off some of the slums out your way the area would improve!

by doublegz | 12 May 12, 8:34am

Chris_J, your conceit towards

Chris_J, your conceit towards the eastern suburbs is insufferable!!

by Didge | 10 May 12, 9:56am

"However let me tell you that

"However let me tell you that it’s not ‘speculators’ who are driving up the price of property. Indeed, they are more likely driving *down* the price of property! For speculators can only really thrive by fierce haggling in order to buy at bargain prices"
This is misleading indeed quite dishonest simply because it is ignoring the other end of such transactions such as the high prices wanted when greedy speculators are onselling and the obscenely high rents charged in between.

by mist42nz | 10 May 12, 12:14pm

You are wrong Didge. Build a

You are wrong Didge.

Build a new house and find out why.

If you were right, then you would be able to build a new house and undercut the speculators.
But you cant, because of the things Ollie mentioned.

by Kleefer | 10 May 12, 10:14am

Olly's analysis shows the

Olly's analysis shows the need to finance infrastructure properly. These extra costs, when added to the already inflated cost of land due to artificial supply restrictions, make producing affordable housing impossible.

by Gummy Bear Hero | 10 May 12, 10:22am

...... property is not

...... property is not unaffordable at all ..... it's your fault for not earning enough ...

There are 24 hours in a day ...... stop slacking around the 16 where you're not working , and get 2 more jobs !

...... stop the blame game , and doing the " dying duck in a thunderstorm " routine , and get stuck in !

by PhilBest | 10 May 12, 4:14pm

Hugh Pavletich has been

Hugh Pavletich has been telling us about Municipal Utility Bonds and how they work, for years.
Yet our glorious Productivity Commission's Inquiry into Housing Affordability did not even mention them.
There is also a system called "latecomer contributions" that works well in some parts of the USA.
Our current system is immoral. Councils take fees up front, do not provide anything like as much value of infrastructure as the fees they collect, AND "finance" the infrastructure they do build, anyway.
Even more immoral, it does not matter where a first home buyer buys their house, its price is inflated by the inflated price of new houses. So first home buyers are paying out a total of money that it would have been better to have simply fined each of them and used the money to build infrastructure. As it is, the money goes to existing property owners, speculators, and banks.

by Hugh Pavletich | 10 May 12, 6:43pm

DOPEY BUREAUCRAT

DOPEY BUREAUCRAT RESEARCH

Most of the housing research in New Zealand is Government funded and controlled by loser bureaucrats who understandably prefer to pull in loser consultants.

At the Local Government level it is blatently obvious that the housing "research" is aimed at preserving and expanding the bureaucracy - and is deliberately not meant to solve housing problems as such. This is why I refer to it as "sun rises in the west research".

The reality is that the structural / systemic problems impeding the provision of affordable housing are extremely simple. Well simple for normal people, but not the dimwitted Government hacks and the partasistic low life consultants that feed off them.

The Government needs to jettison these losers and start pullingh in people with a successful track record and deep tacit understanding of the issues being dealt with.

Hugh Pavletich
www.cantabriansunite.co.nz
www.PerformanceUrbanPlanning.org

by robby217 | 13 May 12, 12:21am

Councils take fees up front,

Councils take fees up front, do not provide anything like as much value of infrastructure as the fees they collect, AND "finance" the infrastructure they do build, anyway.
Exactly, and if the private sector did this they would be locked up for fraud.

by steven | 11 May 12, 7:29am

The point is these costs have

The point is these costs have to be met...so by one means or another paid for.
For me its classic user pays, want a new house pay for this work upfront as a lump sum, simple, no debt or liabilty dumped onto others its known as being responsible. I would have thought that that would be a clear Libertarian goal.
The US uses bonds which are interest paid so in effect it costs more as a rolling cost....If you start to look at developments as a rolling process over time it makes no sense to do it this way IMHO.
regards

by PhilBest | 11 May 12, 4:33pm

The equity issue arises

The equity issue arises because
1) everyone so far has "paid as they go". People paying upfront now are still expected to pay in to the "pay as you go" scheme as well for the rest of their lives.
If you really are correct that paying upfront is the best way, then everybody in houses right now should be socked their fair share $80,000 or so and rates themselves should be partly abolished, and then everyone is in a roughly similar fair position.
2) as I have said again and again and again and you take no notice, the fees push up not just the price of new houses, but the price of all houses, thus penalising everyone who buys their first home, regardless of whether it is a new one or not. Therefore it is not just the people who buy new homes who are paying "up front" AND "ongoing"; it is every first home buyer.
You really must have peculiar ethics if you think this is OK.
Or are you one of these loopy Deep Greens who buffs over the idea of reducing humanity's ability to reproduce, by whatever means - including burdening young people financially to the point that they cannot afford to support a family.

by SK | 10 May 12, 10:23am

Investors and speculators are

Investors and speculators are not driving this market up.
Very few people own more than the house they live in.

by Matt in Auck | 10 May 12, 10:46am

for the first time ever I

for the first time ever I ALMOST totally agree with Olly.
Where I don't agree is that I think it is wrong to say speculaiton has had no impact. It has had some impact, but not nearly as great as some claim

by Basel Brush III | 10 May 12, 1:56pm

I could not have put it

I could not have put it better.
Usually what Olly writes here is a joke. Nice to see something worth reading.

by PhilBest | 10 May 12, 4:17pm

Yes, I credit Olly with

Yes, I credit Olly with having done some serious and honest thinking on this issue. He could possibly credit a few other people with having been right all along, though.

by Hugh Pavletich | 10 May 12, 6:52pm

Olly is to be warmly

Olly is to be warmly commended for this thoughtful article.

At its core this is a massive social injustice and a serious breach of peoples basic rights to affordable housing.

Hugh Pavletich
www.cantabriansunite.co.nz
www.PerformanceUrbanPlanning.org

by Kiwi | 10 May 12, 10:48am

Investors invest so that

Investors invest so that their investments will pay back the investor over time. The paying back mechanism is called rent.
Speculators speculate because they rely on speculative bubbles to give them a capital gain when their properties are sold.
Speculative Bubbles are created and grown by banks creating too much credit(money printing). This is how they make enormous profits for themselves. The intellectual underpinnings of this dubious practice are created in the minds of defunct economists, many of whom live in Ivory towers. We are all slaves to defunct economists.

by mist42nz | 10 May 12, 12:40pm

Paragraph three does not

Paragraph three does not carry on automatically from paragraph two. You've got a skip in your logic there (non-sequitor).

The Speculators must have access to a pool of capital (paragraph "2.1")

While banks are one source of that capital, they are not the only source.
In some ways it could be treated as a Futures exercise. The Speculator pays a fixed price (current price) on the backing asset (house), and hopes to pay off the purchase in the future when they resell (floating leg). They make a yield based on how much the market lifts over the inital purchase price and costs of ownership. The house as security operating as the backsell transaction - commonly the loan you refer to.
But it can be seen from this, that the Speculator needs a rising market, otherwise their is no risk only loss. Also a speculator needs low cost of ownership. And they need a liquid market in order to be able to resell the property!! This is where the easy loans are helping, they supply the liquid capital for consumers to make the purchase.

However without the Speculator, a property seller must locate a motivated buyer. A consumer (purchasing a home not a house) does so based on their needs, so you're relying on the areas needs to perfect match the buyers at the time.
Now... if the money is available to the motivated buyers, they will jump in and pay full market (ie sell price) because they can get money from the credit banks (money printing).
The Speculator must enter a position of competition, and since they're only interested in yield on the spread between buy-sell, they must find or define a low price under market rate...which means they will lose out to any motivated buyer with equal capital.

However because of NZ's sad state economy, and as pointed out in Amanda's columns (between the lines) most NZer's aren't ONLY thinking of homes when they're talking residiental property - they're really secretly (or not so secretly) thinking investments and speculation themselves......and THAT is why the market APPEARS expensive. It because they're all hoping to speculate and pay less than market (which is by definition, impossible - and would create a despressed economy in that area BTW).

What allows the prices to push up so high;
(1) ease of payment - lots of cash available - this the banks are responsible for - but in a liquid market with economic strength that _should_ be a good sign.
(2) every thing Ollie has said. The "new house" should be the top performer and best of breed in it's market. All the seconds trade under this gold standard - but because of all the overheads that gold line has been artifically raised. So there is no "pressure relief" governing where the market will lift too. It will just lift and lift, competition will push prices up, the rising market adds equity to collateral, banks securities-books will rise with it, they in turn will be able to get more and cheapier finance based on hard collateral and value of securitisation, this will let them lend more and get better turnover profits. It looks like a bubble but it's not - because the overheads on the competing new property will keep the lid solidly high - and correspndingly and amusingly enough, the rarity of new houses, plus the value-specifications (if a cheap house is 600k and you're paying 600k putting in a few fancy extras worth 100k wont be a big deal (but you wouldnt put 100k of extras on a 150k house)) will keep the new products well into the premium market.

by Kiwi | 11 May 12, 2:37pm

@mist42nz What allows the

@mist42nz
What allows the prices to push up so high;
(1) ease of payment - lots of cash available - this the banks are responsible for - but in a liquid market with economic strength that _should_ be a good sign.

So does this last sentence imply that the massive amount of consumer debt that NZ racked up in the last property boom is OK?
If this massive debt is not ok then maybe the economic rulebook that the Reserve Bank etc were following is flawed. The next question then is, who wrote their rulebook?

by iconoclast | 10 May 12, 10:55am

Listen to the Chatter Why

Listen to the Chatter
Why housing prices in Auckland will not fall. New builds will occur only when the price of existing stock rises "well above" the cost of a new build.

This is what drives it .. Here they come

An Argentinian’s journey to Australia forewarns a coming wave of new migration beating on our shores. The economies of the old world have been reduced to such a wretched state that it’s inevitable people will look to escape.

In places like Greece and Spain, where unemployment is spiking towards Great Depression levels and extremist politics are beginning to appeal to ever more desperate voters, Australasia suddenly glitters in ways that wasn’t possible when its promise was outshone by the United States. In the case of Greece, there already exists strong ties with an established community here, which is reporting greatly increased interest in escaping the old world for the new. But the globalisation of the last three decades means that everyone can look everywhere for a potential new home, or a safe harbour.

The new attraction. In its latest (Labour) budget, Australia has now copied NZ and introduced Welfare-For-Families with an $1800 cash-up-front annual bribe for familes with school-age children. What they dont realise is that in this new age of instant news that snippet flashes around the world immediately
http://www.brisbanetimes.com.au/opinion/blogs/blunt-instrument/get-ready-for-a-new-wave-of-migration-20120509-1ycqc.html

by Davo36 | 10 May 12, 11:09am

I usually don't agree with

I usually don't agree with Olly either but he's 100% right with this column.
The costs are scandalous, but your average man in the street just has no idea that councils are charging this much.
In the list of costs above, Olly left out the development contribution to be paid to the council on construction of a house. This alone is anywhere from $13k to $32k in Auckland.
With any build nowadays there are many reports to get, noise, insulation, structural, geotech, ventilation, fire etc. These along with the resource and building consents not only cost a lot but take a lot of time. So 12 months to build a house is around normal in Auckland now.
And of course the time delay just makes the whole process dearer too.

by PhilBest | 10 May 12, 4:49pm

Most people do not understand

Most people do not understand what I am about to say, but this is meant to be a serious economics and finance blog.
Some commenters say that house prices are basically the result of "demand"; if people stopped paying so much, prices would not go up so much.
This ignores the basic laws of supply and demand. Only under conditions of inelastic supply, do prices go up as much as they have in NZ. Yes, if people stopped paying so much, prices would stop going up so much - but a lot of people would have to choose not to house themselves.
There are many cities in the USA where the population growth has been simply mind blowing for us puny little Kiwis. in the TEN YEARS from 2000 to 2010, Houston grew from 3.8 million to 5 million people; Atlanta grew from 3.5 million to 4.5 million; Austin grew from 900,000 to 1.35 million; Charlotte, NC grew from 760,000 to 1.25 million; Raleigh NC grew from 540,000 to 880,000; Avondale AZ grew from 68,000 to 197,000; McKinney TX grew from 54,000 to 170,000; and Lady Lake FL grew from 51,000 to 113,000.
These are places where housing stayed AFFORDABLE. Construction boomed, and any eventual "bust" under elastic supply conditions is nowhere near as calamitous as a bust after a price bubble. No cities where prices bubbled, grew much at all. They get a much bigger hangover without even having had busy builders.
Authorities on land economics hold that the PRICE of urban land is determined by supply and demand; and 'fees" are not an "add on" to the price if the price is already much higher than the fees alone can explain. If you abolished all the fees, it would make no difference to prices; all it would mean is that incumbent owners of land and property would get more; the fees come off what they get. Fees are just a "share of planning gain".
IF "supply" was elastic and land owners basically sold to developers at competitive prices, THEN "fees" would be an "add on" to the base land selling prices that are NOT inflated by "planning gain". i.e. there is not enough "planning gain" for the fees to be a share of.
Focusing on reform for fees and not "supply", is not the solution at all. Abolishing fees and leaving urban growth planning in place will just mean that the raw land vendors get more. Fixing "supply" alone would probably fix half the price excesses. Fixing fees alone would not fix anything. Fixing "supply" AND fees would fix all the price excess.

by keriwin | 10 May 12, 5:24pm

Sorry as per my comment

Sorry as per my comment earlier, people wont pay the price to cover my fees, so I am not selling. If the fees were not there then I would sell.

by iconoclast | 10 May 12, 5:46pm

A tad disingenuous. The time

A tad disingenuous. The time period you refer to covers the Katrina Hurricane EVENT and most of the inhabitants of Louisiana moved to the left of New Orleans, to the areas you refer to ie Dallas, Houston etc, and most of these evacuees and refugees werent exactly willing home buyers.

by PhilBest | 14 May 12, 2:50pm

So what? Prices didn't go

So what? Prices didn't go up.
Even more people came from California, because housing is unaffordable there, than what came from New Orleans. And many more people came from all over the place in the rest of the USA and the world.
Whatever the reason people came, houses were built for them double quick and prices did not go up. Infrastructure was financed sensibly, too.
That is my point.
Kiwis, confronted with any amount of population increase for any reason, just throw up their hands in horror and say "we can't do it". "We can't do the infrastructure", "and we're running out of land".......

And house prices continue to go up regardless of how stuffed the economy gets.

by mist42nz | 11 May 12, 12:50pm

Your authorities are either

Your authorities are either quoting each other too much or operating under a false system (ie a select range of property driven by location NOT cost - which means cost isn't a factor anyway, so *can't* be considered overpriced!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!) .

If I have X for a pricetag and it's a choice in the equitable location, between new house or old house, and there is no serious defect, I will take the newer house (ie build). These is tested and bankable fact.

Increasing land supply ties back to location.
Scrap the land restrictions on Aucklands Central Domain, yeha hell it'll sell, because that's not price constrained, it's location, locked by law from supply.

But if you cut it in two pieces and said one has fees, the other doesn't. The lower fee one will move first (all else being equal).

And for investment, that dispersement has to be recovered (and it's service cost and margin).

The "fees" listed above don't count for most resale houses - and consent etc costs are actually a serious matter of thought for renovators - that's money they have to hold back from the purchase price.

by PhilBest | 14 May 12, 3:13pm

What you say does not debunk

What you say does not debunk the authoritative land economists I am quoting.
If you cut Akl Domain in half and one half had fees and the other did not, both halves in a land restrained market will be saleable for the same price. One seller will make more money than the other one who has to pay fees (or sell to a buyer that has to pay fees).
IF the market is NOT land restrained (as in the affordable cities in the USA) what you are saying is correct; one half will sell first at the "no fee" price and the other may sell later or not at all - if there are other pieces of similar land also with no fees.
Let's consider some actual sums of money. In land supply constrained Akl, say each half of the space is saleable under simply supply and demand conditions, for $4,000,000. If fees on one half are $500,000 and there are no fees on the other half, one seller will capture $3,500,000 and the other will capture the whole $4,000,000.
If the same land was in totally-undistorted Dallas or Atlanta (say) it is more likely to be priced at around $600,000 per piece. A $500,000 fee on one half would probably cause this half to remain unsold indefinitely, because there is so much cheap land everywhere else anyway. But let's assume the fee is only $50,000 - in this case, possibly the half with the fee applied would sell eventually with the seller either managing to get his $500,000 or possibly accepting a bit less so as to be able to move it.
What you say, "......consent etc costs are actually a serious matter of thought for renovators - that's money they have to hold back from the purchase price......." is simply exactly the same thing as what I am saying. In the absence of fees, they will pay the "full price" required by the laws of supply and demand. So abolishing the fees and leaving supply strangled, will do precisely nothing for "housing affordability".
Strangling supply at the urban fringe simply does affect the entire market. The reason that median multiples are 3 or below in affordable cities, is not just because fringe land is cheap and new developments are cheap; it is because the entire urban land rent curve from fringe to centre, is lower. The Housing Affordability Inquiry had an appendix with a graph of Akl's urban land price (by location) curves over a number of years - the curves moved UP along their entire length without changing shape. This is exactly what anyone familiar with analyses of this kind from all over the world, would have expected.

by NZ Heads To Fin... | 10 May 12, 11:28am

House prices are too high

House prices are too high because, houses being built are way beyond the basic shelter that a house is intended to be.
Basic size of a house going back was 90m2 to 100m2 now we see house at 250m2 to 400m2
Banks also drive up or hold prices through the availability of credit, therefore if a bank offers 95% loan to many people your going to have classic inflation of house prices too much money chasing too few houses for sale.
Banks and govt have the power to colapse the market at their will by simple raising the interest rates and deposit levels.
It is not in the banks or govts interest to colapse the market as the bank is the landord an the borrow is the tenant until it is FULLY PAID FOR The Govt insists on stability and social cohesion and so it should on behalf of it masters the people who put them there.
The facts are it's going to be a privilage not a right to own a home especially in auckland.
If one wants to own their own home, then was one must have a good education with a good income to have the right to own ones own house.
The whole standard of houses and size has got out of hand and has now become unaffordable
The other problem that i see it that; this country has an imbalance of population being that; half of nz lives in auckland so demand is high so are the prices.
There needs to be some thought put into spreading the population out and making it attractive to live other than auckland.
The problem we have now is other than auckland the rest of the country is a retirement zone or going backwards.
[Race comment deleted. Last warning. Ed.]

by mist42nz | 10 May 12, 12:49pm

The physical size of a house

The physical size of a house actually makes not a lot of change to its cost. (I do some building work).

To make a 5x5 room into 7x7 is a couple more meters of timber and a few sheets of gib & outside wall. It takes the sparky and the plumber no more time to put in a few meters more of wire/pipe. And it takes sod all time once you're set up as a builder to put 7 sheets of gib instead of 5. Likewise, dropping in a 2.5x1.5m window set takes the same effort and work as a 1.0x1.0 single. And since all the factory jigs are easy to shift and set (relatively, don't beat on me factory guys) for one size as any other size, the cost is only really on of materials.

Likewise getting the consents and approvals etc for a 6 room house pretty much the same as a 3 bedroom. and even the drawing is pretty similar once the basic plan is on the table.

So why build a 90m2 box, if a 250m2 house is only 15% more - that's basically the same as you pay the government in tax for the priviledge of building. but this way you can at least enjoy the difference...and if that 15% is spread across a 10-30 yr mortgage....

by steven | 10 May 12, 1:01pm

Yep, of course while the

Yep, of course while the builders costs have only grown 15% the builder can now charge a far bigger premium for that bigger McMansion so it pays him to put as big a house on the section as he can manage....
and some costs dont go up.....a driveway is a driveway and indeed if the house is bigger the length of it might be shorter, saving concrete, shuttering, time......power connection etc negligable difference in cost....water supply.....ditto, smaller garden less top soil to get.....
regards

by mist42nz | 10 May 12, 11:17pm

A driveway is a driveway -

A driveway is a driveway - but 12m2 of concrete takes about the same effort to box as 20m2, and the concrete cost is $180 per m3. so 20m2 is like $250 more than 12m2. if you're using 4x1 which is normal for driveways or pouring against soil/existing edge, then the shuttering cost is negligable for either size, and usually junk/reused anyway. power connections are 1 offs, fixed overhead.

The builder, IF he's getting margin on materials, and many don't or only get a small amount, it is a fraction of the cost. say 100 sheets gib vs 115, 20% margin on the 15 extra sheets? Sheet of gib is what 25 bucks? A whopping $400 over the price of the building, and about the same $400 in extra time for the job (builders are currently the least paid of the building trade contractors). So for the bigger place the builder gets a total of $1000 more. kind of puts those $5,000-10,000 consents in scale....

by steven | 11 May 12, 7:38am

Yes, I would have thought the

Yes, I would have thought the builder margins were on labour and not basic materials....though when it comes to the finishing I think the margins go up.....
regards

by mist42nz | 11 May 12, 1:00pm

depends on who does the

depends on who does the work.
Often teh finishing for nicer (ie more expensive) properties tends to done by specialists. Plasterers, painters, jointers, landscapers - and also more expensive places tend to purchase more premium features - coloured admistures and patterns pressed into concrete, rather than just a slab. Plastered/brickwork/stucco fence & fence pillars rather than post & palings. A class 5 paint job, which requires an equally excellent gibstopping job underneath.

Specialisation is the prime way to raise the value of your labour, if you can get enough contracts to fill your day. And people wanting fancy features are willing to part with premium fees for the luxury (often thats the point). Yet for the bloke on 50k/year, first or second kid on the way, and his wife works too; they're probably just looking for something to put the car on, that isn't going to need them to both get a second job, but that will preserve their capital.

Likewise a renovator, will often put in a low cost improvement, knowing that premium improvements often push the home price up into another bracket where it has to compete with cheap other houses, sometimes with motivated sellersm which often will have advantageous which the renovated property will have to compete with.

by steven | 11 May 12, 2:00pm

Hmm, interestingly the last

Hmm, interestingly the last builder I delt with wasnt happy when I wanted to take on some of the finishing off him, got quite sh*tty. Then he was the organiser so just took a slice off the top and his self-employed son was the "joiner" apparantly. Not wanting to upset him my father-in-law went with the flow, end result fitted wardrobes didnt....Ive been attempting to straighten them but really the frames need to be ripped out and started again, 4~6mm out in height AND width, and not in line by 3 or 4mm....bedroom doors have holes for the locks about 4mm ish out....so work lose....
shoddy....
Yeah agree on the improvements, which really makes sense, you want a return on the $ spent or really there is no point, hence why I dont do much these days as I used to. After about 2005 materials costs seemed to get so bad I didnt think I was getting my money back let alone labour.....so these days I just repair and replace....but Im looking forward to doing a new kitchen.....that will be fun.
regards

by mist42nz | 12 May 12, 6:48pm

Re: The trademen used.

Re: The trademen used. Totally in line with my experience with NZ tradespeople.
Absolute crap job and just not worth the cost to pursue it. And with new legislation putting everything in their hands... time to get out.

by waymad | 12 May 12, 9:22pm

Or just go under the radar:

Or just go under the radar: DIY to better standards, pay off the neighbours (they will need the favour returned soon enough), throw a little patina over the surfaces. My old prediction....

"Always been there. Just painted 'er up a coupla months ago. Like the colour?"

by Gummy Bear Hero | 12 May 12, 9:42pm

We used local North

We used local North Canterbury tradesmen for our Loburn property ( carpenters / electricians / arborists / plumbers / gas-fitters ) over 6 years ....... and no reason to complain about any one of them !... 100 % satisfaction ..

.. . the most fun was an older carpenter from Greyskills : he was a hoot , incredibly hard working , and willing to teach a novice DIY'er .

Since then we've had carpenters and painters fix up Mummy Gummy's house in Rangiora ( earthquake damage ) , and once again , awesome fellows did the jobs . Tradesmen from Woodend / Oxford / & Rangiora .

by mist42nz | 13 May 12, 7:20am

can you clone 'em?

by scarfie | 10 May 12, 2:40pm

While you are on that line of

While you are on that line of thinking, it can be cheaper to put in windows than to have wall. Window goes in, finished. Wall goes up, has to be clad, then plastered, then painted, on both sides.

by mist42nz | 10 May 12, 11:19pm

A window has to be in, to

A window has to be in, to allow airflow, as legal design function. However, like-with-like, "upsizing" is cheap because it's materials, not work. Work costs, materials not so much.
"professional" work is the killer - and all the bureaucrats have to be "professionals"

Where what you're saying is a change. put in "a window" vs "a sheet of gib"
What I'm saying is 25m2 glass vs 16m2 glass, 8 sheets vs 6 sheets.
The glass is more expensive than the gib, so exchange is expensive...but _more_ is not.

by ajd81 | 10 May 12, 3:57pm

Its easier to paste this than

Its easier to paste this than reply to this.
http://www.youtube.com/watch?v=5hfYJsQAhl0

by mist42nz | 10 May 12, 11:22pm

It's a nice link, thank you

It's a nice link, thank you for that.
But do you actually have any idea about building?

by steven | 11 May 12, 2:02pm

I might keep that for GBH

I might keep that for GBH replies....
regards

by powerdownkiwi | 10 May 12, 9:34pm

Why not think outside the

Why not think outside the square, re maerials? My walls and roof cost 16000, painted both sides, insulated, delivered. Four people x 10,5 hours to erect .

Have youy equated what we post here about energy? Peak energy flows on for the planet, says no mortgage will still be being paid in 30 years. That's cloud-cuckoo stuff.

by mist42nz | 10 May 12, 11:24pm

Well considering I had to go

Well considering I had to go through 2 builders before I found ONE that could do a normal job - and even then I had to assist with the work because his offsider was on job elsewhere.

I STILL have 6000 worth of galvinised iron sheets, capping and valleys sitting in the shed because the first builder ordered it and left it sitting on the driveway for a month in the weather, and never got around to putting it up. (after being told "I'm flashing the place up a bit, the cost is going on the mortgage so don't worry about the cost").
Took 2 people 16hrs to put it inside to dry (and crc) and then transfer offsite to dry shed.
So on the final job, I could only really afford coloursteel, not the ARX I had originally lined up (galv guy also went to different company than I'd told him too).

Peak energy, and regards 30 yrs plan. Says in 30 yrs your mortgage would be inflated to nothing anyway, so who cares. The cuckoo stuff is thinking the rich and powerful will be going down with the plebs....
So vote Cthulhu.. the loyal will be the lucky ones for they SHALL be the first eaten. WHY choose the lesser Evil?

by steven | 11 May 12, 2:09pm

ah but, for the last 80

ah but, for the last 80 years, yes OK inflation has been the norm....If however you had bought your house in say 1928? hello Great Depression....
So the point of Peak energy is that it will cause a Great Depression....hence deflation...so you would care.
So you could with some correctness say that the BBs were the start of the mother of all the bubbles, as they exit so will that first bubble....huge drop in house values in that case....
Rich and Powerful, well think marie antoinette.....
regards

by SK | 11 May 12, 4:05pm

Doesn’t help your arguments

Doesn’t help your arguments choosing extreme outlier events in history as support.

by steven | 11 May 12, 4:17pm

If you look at the debt and

If you look at the debt and debt to gdp compared to the 1930s its actually significantly higher and that was a credit event also.
Then we had the Long depression in the 1870s...so it was not a unique event...
http://www.debtdeflation.com/blogs/
Not that I expect you will bother reading it, but its recorded....
regards

by mist42nz | 13 May 12, 10:52am

Is that the correct Link,

Is that the correct Link, Steven?
It goes to ProfSteve Keen's blog page. A brief skim didn't show any historic 1870 Long depression.

Like what he had to say about the predictability of the Crash, and how common models leave out have the information (because those models are not actually designed for what people are using them for). Although I would have to wonder if they ever took the next step and to isolate out the "Real value" of the assets, and the "overhead costs" of the assets - giving an idea of how much of the borrowing is actually being blown into the "overheads" and not producing value (now or in the future).

I was concerned however that the "Just Banking" video presentation, had the bank/ers working for free (when they're significantly higher paid than many other sectors) and the banks not having any financial costs for loans. Thus and the list-type model didn't have decent double entry, so the figures can munge together (Loan + Loan = Loan. Loan - Loan = 0) without displaying important detail.

by SimonP | 11 May 12, 4:47pm

Yes, it's far better to

Yes, it's far better to ignore outliers and extrapolate short time series into perpetuity. Even better if you choose the start and end points that confirm your opinions.

by PhilBest | 10 May 12, 5:01pm

In modern history, housing

In modern history, housing has consistently cost a median multiple of around 3.
Society spends roughly a similar level of its income on housing, whether the income is low (1930's first world, current third world) or high (current 1st world).
The difference is that as incomes rise, people do get bigger and better homes.
"NZ Heads to Fin" does not understand this basic reality. People do not naturally choose to start spending MORE than the historical norm on housing, to get something way beyond their current incomes.
As a matter of fact, most of the problem is in the land price. We pay probably ten times as much per acre as our grandparents did, and we pay far more than ten times as much per acre as people in the undistorted markets in the US do. Half acre to 1 acre lots are typically $35,000 to $50,000 in approx 200 US cities (out of 260 - in the annual Demographia Reports).
The structure, one would expect, should be improving in value for money somewhat like cars and aircraft and electronics have, if there are relatively free markets in building. But the Productivity Commission's Report on Housing Affordability said that the high cost of land, and difficult regulatory processes, were preventing "best practice" and progress in building techniques.

by mist42nz | 10 May 12, 11:39pm

ten times as much per

ten times as much per acre.
Putting in 3% allow for value of money over time. 60 years (grandparents). @3% is about 22yrs for a 1000% compounding affect of inter. so lets say 2500% of original price.

So we should, allowing for that time value of money, be paying 25 times as much per ace. And you say we're only pay 10 times. Considering how much other staple commodities have gone up in the same time frame then we're winning.

With regards to the bigger homes, much of it is technological and logistic. We have "machines that make machines", as well as "people whose jobs are to think up machines". Roading and transport is faster and cheaper. Planning is easier, calculation and redrawing less time consuming. And the materials have getting more technically advanced.

So for my 25x price tag I can afford superior double glazing, sound insulation, solar toys, fancy materials, warmth, full carpet, air con.
But for 10x ... am I only getting a cutprice cheapy?
So what really changed?
The amount of professional requirements, the overheads, the bureaucracy in every step. The extra debt service cost amortisied into every area of the production.

Land cost has hardly changed ... take auckland it's over 2million people - 60 years ago, it had less population and lower wages. 60yrs ago what did it cost to get good location in a city with 2 million people, where those two milllion were similar level of occupation to modern auckland? Basically you can't look at the number and say its increased without looking at the city and admitting it's not the same city as the one in your grandparents time.

by PhilBest | 11 May 12, 4:42pm

OK, Mr Semantic, I was

OK, Mr Semantic, I was talking about "median multiples"and prices relative to incomes.
We are paying many times as much as our grandparents, per acre of land, relative to income.
Did I really have to insert the words "in real terms" or "relative to income" every sentence, on a serious economics and finance blog where contributors are meant to be reasonably intelligent and actually get what others are saying?
Your point about "not the same city" is nonsense. This is what median multiples are all about. If some cities, due to supply elasticity, have median multiples around 3 or below, then other cities with low supply elasticity due to regulations, should also be able to achieve median multiples of around 3 by regulatory reform.
Certain contributors on here are just loony Gaia religionists serving their Gaia earth mother, who would be cross if her turf was disturbed anywhere. These people are simply impervious to evidence and reason, and all they do is obfuscate and time-waste.

by mist42nz | 12 May 12, 7:03pm

Strangely enough I actually

Strangely enough I actually am aware of what you were trying to say.

Thus the need to point out to folks like yourself that your metric is a square peg in a round hole. I'm not saying "it's different this time", or "but we're different". What I'm saying is that 3 median ratio and price to income is about as effective/accurate as the RBNZ trying to work the economy via the OCR. It kind works (but really doesn't) if you bash away at it, and ignore the trends and evidence to the contrary.

One of the biggest faults of that system, is it tries to operate in a snapshot (or recent history). The asset class you're examining is speculated (house vs home) on 5 through 30 yr timeframes. ie you pull a median value - but the market bubbles 4 times in 30yrs, and an investor at 23, is prime income earner at 38-50 (15yr). So is your relative price pinned to the 23yr olds income (buyers?) or 30 yr olds' income (sellers) or investors incomes (50yr). You could of course average that out and that where my maths papers come in as well as my finance papers.. you lose the integrity of your data because the data points your smearing together (1) have too much granularity and (2) are noticably dissimiliar at this level of examination. Which if like me, you had some papers in Information Science, you'd know.

or if you actually watch the figures. Which is how I first realised median multiples weren't accurate in small samples, in sparse groups, or when connected with widely disparate values.

But hey, if you think it's a religious issue, and you have some sort of bigotted issue about my religion... I think that indicates plenty about the value of your judgement... and how we should judge YOUR values.

by PhilBest | 14 May 12, 3:24pm

Huh? Trying to baffle us with

Huh?
Trying to baffle us with B.S.?
Anyone who buys in a market with a higher median multiple than what their grandparents bought in, is at a disadvantage relative to their grandparents at that point.
"But their incomes might rise faster than their grandparents incomes did"?
Or,
"But interest rates might stay lower over their lifetime than what they did for their grandparents"?
So these "might's" absolve urban planners of any responsibility for unaffordable housing?
This is what you are saying.
But the inflated urban land prices themselves are a drag on the economy, because they represent a cost to the productive sector of the economy. And a burst bubble is inevitable, and so is a painful deleveraging.
The evidence mounting up from everywhere, is that it is the first home buyers in the last few years of house price inflation, who make up the overwhelming majority of bankruptcies over the next few years.
So I really don't know how you can lie straight in bed and make those B.S. claims to the effect that there is nothing to worry about when young people have to pay a much higher proportion of their current incomes than what their forebears for generations did.

by jimmy squirrell | 10 May 12, 11:40am

call me naive, but why is is

call me naive, but why is is that in pretty much ALL the western world there was a MASSIVE price appreciation from 2000 to 2007? did they ALL suffer from high council costs? The thing all bubble markets have (or had) in common was easy credit, and easy credit creates demand by allowing more people with more money into the market place, and as this increases prices, the motivation to enter the market gets greater and the positive feedback loop ensues. There is no question that higher council costs and limited land release have played a part, but they are not the major reason. For me the easy rule of thumb is to look at rents - yes they have gone up to reflect supply and demand, but not nearly as much as prices. Rent = supply v demand, house prices = supply v demand +/- fear or greed / speculation. Current prices have a large speculative premium built in.
[Race comment deleted. Last warning. Ed.]

by PhilBest | 10 May 12, 5:13pm

In pretty much ALL the

In pretty much ALL the western world, there does happen to have been a mania for "urban growth constraint planning". Al Gore has a lot to do with this. What planet have you been on if you have missed this?
There are enough exceptions to YOUR rule to totally disprove it. For example, numerous cities (200 out of 260) that had no price inflation at all under exactly the same conditions of credit that caused a catastrophic spike in growth-constrained California.
At the other extreme, South Korea had NO credit expansion at all, in fact national net savings increased, while house prices went from a median multiple of 4 point something in the 1970's, to 16 in the late 1980's.
The increase in net savings was due to young people desperately saving for a house that was rising in price far faster than they could save. Marriage and birth rates collapsed. All due to new urban planning policies introduced in the 1970's, based on the ghastly Pommie ones.
Rents remain low in a supply-induced price bubble because 1) many landlords own property that they bought before prices went up 2) new investors are chasing capital gains, not rental income, and new investors tend to increase the supply of rental properties relative to demand for rental properties. Renting in a price bubble is good sense for young people. DON'T BUY until prices crash.
This stuff has been gone over again and again on this site, but certain loony Gaia-worshipping Jesuit-equivalents have to troll on here to muddy the issue and please their Deity. It is time to apply the old principle of keeping religion out of politics, to these people.

by jimmy squirrell | 10 May 12, 5:54pm

PhilBest - not sure where the

PhilBest - not sure where the gaia/jesuit reference comes from, must be an old hang up of yours? Anyway, your arguments are as usual nonsensical, are you Olly in disguise?
Take rent for example, landlords dont charge what they need to to get by, they charge what they are able to - if there is massive demand for places to live due to underbuilding based on council restrictions / cost, then demand is great and rent rises appropriately. If i have to choose between 2 propositions a) prices rose because at basically the same time ALL councils around the world suddenly added restrictions OR 2) prices rose because a global credit boom occurred which enabled people to borrow more, I know what I would choose as more plausible, especially given rental rises were not great AND most share markets also rose greatly during this period (ie were shares subject to council restrictions???????). I could point you to some stats from Aus which show that for the most part up to 2005 Aus was overbuilding property, but this did not stop a run up in prices from 2000 to 2005.

by steven | 11 May 12, 3:00pm

Indeed looking at the empty

Indeed looking at the empty houses in US suburbia and the empty plots which councils probably got into debt to supply service to but now wont get a return as no house was built....its hard to justify that it was land contraints. Now if you go to the Alan Greenspan puts ie dropping the OCR for years to keep going the ponzi scheme going you start to have a global occams razor.
So for me its lay it where it deserves to be laid at the feet of the Libertarian to hold the highest financial office.
regards

by PhilBest | 11 May 12, 4:52pm

Jimmy Squirrel and Steven are

Jimmy Squirrel and Steven are both just time wasters on this blog.
Neither of them are capable of being reasoned with or shown evidence.
Neither of them have addressed my points.
1) most (200) cities in the US did not have unaffordable housing and price bubbles, in spite of having the same monetary and credit conditions as the other 60.
2) South Korea has had serious unaffordability and price volatility not related to credit expansion at all, rather the opposite.
I could add a third example for them to explain - Britain following the 1947 Town and Country Planning Act, had a volatile repeated cycle in house prices, of about 16 years in length, which has continued up till the present date. The number of houses built in each "boom" cycle has got steadily less, as price response as got steadily greater.
Jimmy Squirrel and Steven, on the subject of urban growth constraint, are like the medieval papists on trans-subtantiation or papal infallibility. It is a religious thing. Never mind the evidence of the pain it causes young people through rip off urban land prices. Urban growth constraint is such a sacred thing, it is not to be questioned or blamed for anything.

by mist42nz | 13 May 12, 3:25pm

Phil, you haven't shown that

Phil, you haven't shown that your "evidence" is relevant or why your method is acceptable. In fact the information you've quoted is more anecdotal or impossible to verify - eg How do we check 200 US cities trends? We have neither the abilty nor the resources to validate that data, which means that it's just as likely you've got it secondhand from elsewhere, and it's highly probable you haven't thoroughly check it (and/or its accuracy & method) either.
And then you issue a personal attack, again without supporting evidence.

But here's one reason for urban growth constraint in NZ.
People speak of money as being a "scarce resource". Yet there is well over a million million currency units on issue in the world.

How scarce is Gaia? One.

Also if you take a look at the US or Europe. Do you know where their -best- agricultural lands is? It's underneath their cities. This comes from towns springing up where water and good soil are plentiful and where there is some shelter. This is a simple logistics effect, as it's easiest to manage city resources in such a location). Supporting industries grow, as primary industry flourishes - and if there is enough trade the town will attract more urban activity. They will tend to build near their neighbours and workplaces - just as most Auckland workers prefer not to live in Hamilton or Taupo. This encourages the urban boundaries to push out into the surrounding farm lands - to the point where large cities hit the Rome-effect, and become consumer based, At this point the City no longer cares about local farm or land quality, as all that kind of stuff is just purchased elsewhere and shipped to the cities consumers.

And as long as folks in Auckland are complaining about land prices, and aren't willing to move to cheaper satelittle towns - and businesses that can ship complain about land and labour prices and won't relocate. Then the median price issue is one of short sighted self-interested consumerism, not about economics or land.

by PhilBest | 14 May 12, 3:36pm

Desperate, desperate. You

Desperate, desperate. You obviously haven't learnt much from following this blog and you obviously don't know much beyond the eco-loony hysteria that passes for information and education these days.
Use the annual Demographia Reports to check the median multiple trends in 260 odd US cities with populations over 500,000.
Refer the Lincoln Policy Institute's "Atlas of Global Urban Land Consumption" to find out exactly how "urbanised" each country in the world is - as a proportion of total land or as a proportion of arable land.
Assumptions that we are "running out of land" are just plain nonsense, and worse - lies from political power grabbers and rent seekers. Especially in NZ; but even in Europe, "food security" is not a problem, and they are quite a bit more urbanised than India, China, Pakistan, Bangladesh, etc etc. Japan is about the only major nation that has food security problems; they have 120 million people on slightly less land than NZ.
Auckland residents and businesses "won't relocate to sattellite towns"? Huh? Name me one sattelite town whose own "plans" (or those imposed from the "regional" level in any case) is so pro growth they can take, say, 100,000 people in the next decade?
I am 100% in support of sattellite towns and decentralised urban form; this, and low, stable land costs, is the secret underlying the fact that the USA's urban economies are the world's most productive. Everyone is making a colossal mistake in assuming that sprawl and low density is a disadvantage that somehow the US makes up for on other factors. I know: what I am saying is heresy. Call me Galileo and haul me before the inquisitors, quick, before it spreads.

by mist42nz | 14 May 12, 4:32pm

Desperate? Not even

Desperate? Not even slightly.
As for the reports, they're as useless as the metric you're using. But hey, I get it, you're so educated you can't learn. You got ALL the answers.

"running out of land". No. land is never a problem, as pointed out we can create more. What we are running low on is cheap resources, and location (the two are connected). Land is not in short supply; land for certain uses, developed, with access to necessary resources is. That's why it has increased value.

"Food security". Widely toted as the next big demon (after water security). and following "Communism". Countries in the world produce more than they can consumer, some pay subsidies to producers so they don't make more of a product, and there are warehouses full of the stuff. .... so why is so much of the world hungry? Why is the crap on our shelves so crappy? And expensive? And places like the US where so much of the "food" is bad for you.

If they were notified, there are plenty of places that would welcome the extra business. But it doesn't work that way .due to the very forces you say aren't a problem. The problem being the overheads and clawbacks to sell and setup infrastructure in those places.
What you are saying isn't heresy. It's just incorrect. And feel free to say it, there's a soapbox on every corner - free hair gel and loincloth to every client.
If low density and sprawl were good then NZ would have it made (and probably Alaska too, and the central African states). low density and sprawl = logistics costs. It also means that central government decrees have less people to supply resources, and that includes public services (swimming pools, roads, parks, waste management, libraries, schools) all much harder to support. Otherwise rural NZ would be booming rather than watching incomes slide.

The secret underlying the US economy is early on many people invested cleverly into infrastructure and the US government had no moral issue about taking other peoples' property (land, money, lives). They also had a rush of cheap labour escaping the politics of Europe. Throw on top of those two items, cheap energy reserves, and plentiful local resources, it's a no fail venture. Also to top it off, they didn't have the deadwood at the top from hundreds of years of aristos. and they have an interest in IP that lets them take advantage of others. All those factors reduces issues of decentralisation.

I know for a fact that the local power industry in NZ, has massive issues with low density supply vs price. Both at company and national levels. Such things no a problem in the US - cheap labour and large profitable population centers meant no such problem...that and the lack of socialist ethic saying that everyone was entitled to grid supply - and thus sucked the money out of NZ'ers' pockets to make it happen and returned little wealth in doing so.

by rastus | 10 May 12, 11:45am

When a new sub division, home

When a new sub division, home etc is built, it has immeadiate access to all of the citys ammentites, such as libraries, roads, schooling, water so on and so on. These costs being charged are in affect an entry fee to the use of these existing, already paid for (debt ridden) resources.
Councils are all short of cash and borrowing flat out, one could argue that they are not charging enough. The reality is that the cost of maintinaing these facilities is rising by the day - they have to be paid for somehow!
Council fat is another issue. Whilst it can be trimmed, I believe it would make little difference to the massive ongoing infrastructure and borrowing costs that are due.
So while you all pat Olly on the head for being so right...I don't really think you have thought this through. These fee's go to sustaining real assets, debt and building new facilities due to the increased populations the new builds bring.
Where else do we get the cash from...do you want existing hoome owners to subsidise new builds - because that seems to be Oll's agenda..

by PhilBest | 10 May 12, 5:27pm

Why don't we just fine

Why don't we just fine everyone when they turn 18, for having the temerity to be born?
Up till recently, everyone paid local taxes all their life for these things.
Now, every young person has to pay upfront AND all their life; this is FAIR??????
The increase in price of new houses, pushes up the price of ALL houses, so young people, wherever they buy their first home, pay the "fine" for "needing infrastructure".
An outright fine paid to the Council would be better, because then the council could spend it on the right things. As it is, the banks and sellers of long-owned property are getting this wealth transfer from the young.

by mist42nz | 10 May 12, 10:51pm

and some people are silly

and some people are silly enough to think government and infrastructure exist to serve their needs. ha!

by PhilBest | 11 May 12, 4:54pm

Yes, there is no such thing

Yes, there is no such thing as "public servants", is there. They are all "public masters", and know it.

by ex agent | 10 May 12, 11:53am

From where I stand I believe

From where I stand I believe the main reason is us baby boomers were in a position to really go for it in the years 2002 to 2007 and boy did we go for it and not just in NZ. We had the incomes, the drive ,cheap interest rates and cheap assets to buy. The banks just loved us. Many have bought far properties than they will ever need for income and capital gain. It became a game for many just like farmers buying more and more farms to have more than the neighbours. It was a perfect storm so to speak and it will probably never happen again in our lifetimes. In many parts of NZ the impetus in prices peaked in 2007 and have dwindled back ever since. In the mean time we have truly snookered our own children and grandchildren who will struggle to get onto the ladder. Some of them will be lucky as they will eventually inherit from those of us who have done well so to speak.

by David B | 10 May 12, 1:14pm

I'm a baby boomer, and I

I'm a baby boomer, and I didn't 'go for it' and buy a property between 2002 and 2007. So please don't say 'us baby boomers' as there is no 'us' here.

by iconoclast | 10 May 12, 1:45pm

Anyone who is a genX or a

Anyone who is a genX or a genY should have a very close look at episode 5 of Professor Niall Ferguson's documentary series "Civilisation - Is the West History" and the 6 Killer Apps. Killer App 5 is about consumerism and these ingrates should come away with a sense of gratitude towards their BB parents and how life would have been if not for their BB parents efforts. Not ingratitude. You can get it on youtube.

by PhilBest | 10 May 12, 5:33pm

Oh, come ON. The housing

Oh, come ON.
The housing racket is so bad that it would be hard to still be "in credit" as a generation "owed something" by your descendants. There is every chance that the current generation will be the first one in history left worse off by the preceding generation's actions. "Housing" is that big.

by Justice | 10 May 12, 7:05pm

If things continue to go the

If things continue to go the way they are headed I suspect Gen X,Y, and Z will deal with the BB's by making then take "showers" in rooms with no windows but plenty of gas. My less callus point is at some very near stage in time the next generation will be making the rules on EVERYTHING.

by mist42nz | 11 May 12, 12:36pm

Saw that with the rise of

Saw that with the rise of GenX.

The BB and previous generation, were saying but look at all the infrastructure and laws we've put in place - you should be thankful.

But the reply wa: thankful? You've enslaved us to a lifetime of debt to pay for the inflationary costs. In the meantime you had high rates of employment, cheap transport and needs, and low prices. You enjoyed the fruits of your efforts, and have left us to scramble for scraps. Why would we be thankful for that?

Each party only looking at the needs outside their own personal window, seeing what them and their egos could get in their lifetime. How can there not be a resulting conflict eventually?

by mist42nz | 10 May 12, 11:45pm

" just like farmers buying

" just like farmers buying more and more farms to have more than the neighbours"

Not to "have more than the neighbours".
But I'm open to alternative viable plans... how else is a [dairy, in my case] farmer going to increase their business. Because that's what business people do,y'know, if they're successful, they try to increase their successful business.

by Ralph | 10 May 12, 11:58am

The envy seems justified if

The envy seems justified if they don't get the tax break you get. Why any system would give special tax treatment to speculation of any kind is beyond me.

And many businesses pay their tax in advance and (might wrong here) but don't farmers get taxed on their stock growth before it's realised?

by rastus | 10 May 12, 1:43pm

yeah...but don't forget their

yeah...but don't forget their stock rises in value due to deductions they get for all the inputs in raising them. Some of this increase is taxed, some, being the capital amount, doesn't. Even so, they still get tax breaks that Joe public doesn't get ..

by mist42nz | 11 May 12, 12:01am

rastus, you smoking the weeds

rastus, you smoking the weeds again?

What tax breaks do farmers' businesses get that other business' don't get?
What tax break does the farmer get on their income that other self employed/business folk doesn't get?

The stock get valued according to several schemes approved by IRD, and at rates set by IRD.
This is done because a cow is able to produce more cows. The new cows don't really show up on the book, nor does the older cow depreciate normally (they cost, then they work, then they have disposal value - no depreciation or unit production cost - and no way to accurately predict lifespan of the asset either).

So what value is the animal? It's clearly a productive piece of vital plant - so it has value, and it has cash value normally at disposal. So it must have an agreed value.

But that value fluctuates based on market price and the value of it's production (the milk or meat price) so one system allows the animal to be valued that way - a preset price.

However yet again the bureaucrats didn't know as much as they thought and created another system. the detail I'm not familiar with.

But by allowing stock to be sold from one system to the other, created a rachett system. The farmer could then make a paper profit (or loss) by transfering stock out when one system was high value, and the other low (or vice versa). And yet the animal and farm hadn't actually changed. But this gives a tax advantage by doing this arbitrage between the two systems, which although follows the law, and rules laid done by IRD (ie all the laws and rules that the court, government and IRD use to validate their own actions) it upset the IRD that people used their system, and upset the government because it allowed the farmer not to have every penny possible sucked out of them. So recently the rules have been changed to make sure that teh farmers cant take advantage of the system set down by IRD.

The annoying part is that the animal when raised costs money but produces nothing. ie is an expense. But the government has decided that this makes the animal an asset.
By declaring it an asset, then it increases the profit of the operation, and profits are taxed, whether or not the asset is cash. So the raised from birth stock is taxed even though the "profit" is unrealised.
Of course later when the animal is disposed of, or dies. It counts as a loss, so the loss actually acts as a rebate against the spread of the herd value (year start vs year end) - even though the disposal is the first actual realisation of cash for the animal....

by SK | 10 May 12, 12:01pm

And still prices

And still prices rise.
Another 2.2% in Auckland last month.

by ex agent | 10 May 12, 12:42pm

Thanks for the update on

Thanks for the update on Auckland Bernard.

by mist42nz | 11 May 12, 12:04am

is there a world outside

is there a world outside dorkland?

by moa man | 11 May 12, 8:49am

Yes there is, but keep quiet

Yes there is, but keep quiet about it!
The very last thing we need is Aucklanders racing around the rest of the country building leaky townhouses and stuffing them full of immigrants.
All prudent farmers know to keep the pigs in the sty, and not let them have the run of the place.

by Banksterbasher | 10 May 12, 12:13pm

I blame Olly for high house

I blame Olly for high house prices.

by Hugh Pavletich | 10 May 12, 12:24pm

NZ RESIDENTIAL DEVELOPMENT A

NZ RESIDENTIAL DEVELOPMENT A SHAMBLES

Thanks Olly for a most informative article.

When one considers that affordable new fringe starter housing stock within the affordable North American markets is about $US600 per square metre and here north of $NZ2,500 per square metre ALL UP, it suggests we have a "problem" -

http://www.interest.co.nz/news/49029/opinion-houston-we-have-housing-affordability-problem

I covered howe this "bloated bureaucracy on steriods" game is played out back in November last with "How housing bubbles are triggered" -

http://www.scoop.co.nz/stories/HL1111/S00011/how-housing-bubbles-are-triggered.htm

The long and the short of it is that Central Government needs to take Local Governments completely out of fringe land supply. Letting them "monkey around" with it is only an invitation to these bozos to be incompetent, as the above article clearly illustrates.

There needs to be open fringes with post development zoning and "no go" areas clearly identified for sound reasons. And we need "flexi zoning" internally, where property owners along a zone fringe can change use, provided they get the consent of property owners a further 50 metres out.

Cities are dynamic and must have the flexibility so that unnecessary "artificial scarcity values" are avoided.

Infrastructure needs to be financed appropriately as well on the bond market, along the lines of the Texas Municipal Utility District model -

http://www.performanceurbanplanning.org/files/MUD-Summary.pdf

http://www.performanceurbanplanning.org/files/MUDInfrastructureFinancingSystem.pdf

It is past time Central Government stopped tinkering and "wet nursing" these losers in Local Government. It needs to be borne in mind too that most people go in to Local Government employment, because they are too tired and/or incompetent to secure employment in the private sector. Not all of them - but good numbers of them.

This is why it is critically important to make things as simple as possible for these losers - and make the necessary systemic / structural changes, so that they are forced to perform to at least a half by acceptable standard. Sweet talk about "performance" is definitely not the way to go - instead just get the structural / systemic canges in place.

There would be huge merit in the Minister of Local Government putting out a call for the thickest New Zealander that can be found, as his Principal Local Government Advisor. This is called the "George Washington approach". While General of the Revolutionary Forces, Washington had as his Batman, the thickest guy he could find in his army. Before issuing orders he would run it past his Batman first to see if he understood it or not. If he did - the order went out!

Whatever it takes to simplify things in Local Government !

Our residential development cost structures clearly illustrate how these Local Government losers have just about wrecked our residential development industry and created massive social and economic harm in the process as well.

There was a time years ago when Government hacks concluded their correspondence with "Your humble and obedient servant". Todaty they could conclude them with "Your ignorant and obnoxious master".

So there is a "cutture change" required within the Local Government sector - burt that can only happen when the appropriate systemic and structural changes are made, so that these Local Government Losers perform to an acceptable standard - with a "here to help" attitude, not a "here to hinder" one.

This is something we are pressing for in our usual humble and charismatic way at Cantabrians Unite www.cantabriansunite.co.nz here on the Christchurch front (read on going facebook discussions as well).

It is to be hoped that others at the Local level throughout New Zealand organise themselves and get the necessary changes in place. The more that can happen from the "ground up" local level the better. I think most of us over these past 20 years have seen more than enough of the "top down" bureaucratic approach.

Just check out my last article at the Cantabriansd Unite facebook page on the Christchurch bureaucratic balls ups. One hardly knows where to start and stop.

Hugh Pavletich
www.cantabriansunite.co.nz
www.PerformanceUrbanPlanning.org

by mist42nz | 10 May 12, 1:03pm

Hugh Hugh Hugh.... I thought

Hugh Hugh Hugh.... I thought you knew better.

You mention Central Government should take the local councils out of the issue....
Central Government are the ones pushing the cart!!!! They're the ones telling the councils that they must have all these steps in place! and they oversee that the council must train and get licenses for all those involved or else.

Its central government that pushing these problems! They never going to be the ones to tell council not to!

by Hugh Pavletich | 10 May 12, 1:52pm

Mist - with all due rspect,

Mist - with all due rspect, you misread what I wrote.

by mist42nz | 10 May 12, 10:03pm

"The long and the short of it

"The long and the short of it is that Central Government needs to take Local Governments completely out of fringe land supply. Letting them "monkey around" with it is only an invitation to these bozos to be incompetent, as the above article clearly illustrates"

Central Government needs to take Local Governments completely out of fringe land supply.

I may have picked on one piece, but Local government dances to the tune set by Central. They are the price followers on RMA and Building Legislation and policy on land use.

by Hugh Pavletich | 10 May 12, 10:56pm

GET LOCAL GOVT OUT OF LAND

GET LOCAL GOVT OUT OF LAND SUPPLY

Mist - just to assist you out of the misty fog and make things clearer........

There is no need whatsoever to have Local Government directly involved in land supply issues. What I am saying is that Central Government should prohibit them from it. Allowing them to mess about with it, is simply an invitation to them to lose control of their costs and stranhle the supply of it.

In other words, emulate what they doin the affordable North American markets - particularly Texas.

Waymad has articulated this issues very well elsewhere through this thread.

Hugh Pavletich
www.cantabriansunite.co.nz
www.PerformanceUrbanPlanning.org

by mist42nz | 11 May 12, 12:27pm

And What I am saying is

And What *I* am saying is Central Government are the ones putting them INTO land supply.

So hoping that Central Government will do completely the opposite to normal base philosophy is ridiculous. It's not just a 180, it's a completely change of pardigm of operation, that I don't think large chunks of our legal and land registers would handle.

by mist42nz | 10 May 12, 12:58pm

What I hate is having to cut

What I hate is having to cut corners and materials/features to be able to pay for beaurucratic overheads.

I can underfloor insulate for little more than what it costs for the council to inspect and sign off on that it has been done.

12% of my last solar water install was consents, not including inspections.
I totally recommend double glazing (10k for 3bedroom house, LE, wood framewindows) which is the same price as _one_ of Ollies overheads.

Also surprised Ollie's people didn't get asked for developers contribution (roading, sewerage) or a works deposit, or have to comission and submit an impact report.

But to be a little fair on Local Councils... much of their activities are dictated to them as "must be followed" by laws, amendments or schedules put in place by Central government. However the councils seem willing to cash on these rules rather than tell the central government how inappropriate or unacceptable they are. (allowing profiteering for the favour of removing direct responsibility...similiar to the council did with the water people). The only council I know of that has stood up was the Wairarapa/Masteron Council who refused to do hideously wasteful reports on all parks in its area - much to the ire of Central governments

by bob | 10 May 12, 1:11pm

$5000 for a Resource

$5000 for a Resource Consent?
They got off lightly - that's for the most basic of consents i.e something that is Controlled activity like earthworks (just paperwork). As soon as planners are writing reports and making assesments of effects you're into the 10s of thousands. Auckland City has been getting rid of anything zonedfor Permitted or Controlled activities. The more land zoned Discretionary the more money they can take.

Cheap housing is usually multiple unit development. Any development over 3 houses is heading for $10's of thousands for planners/urban designers, infrastructure engineers, arborists, geotech and council fees to get RC. Ironically the potentially cheapest houses often attract the most RC fees. Also as soon as you are adding houses you've got $20k plus for development tax per unit.

by ex agent | 10 May 12, 1:53pm

You always have those who are

You always have those who are ambitious and those who are not. Which camp are you in?

As for Iconocast I am sure a lot of g and Y would like to be able to buy property now rather than wait for their parents to die and use the inheritance to get on the ladder. In the meantime while they wait for the olds to die they just keep renting.

by PhilBest | 10 May 12, 5:37pm

Joe Flood and Emma Baker

Joe Flood and Emma Baker (Flinders University) "Housing Implications of Economic, Social, and Spatial Change" (2010); among many other things, make a disturbing finding that there is little evidence of "inheritance" of the inflated values of the houses that their parents owned.
Possibly the value is being spent by their parents on retirement village fees etc.

by mist42nz | 10 May 12, 10:49pm

Many older folk have used

Many older folk have used their house as their primary investment vehicle for old age. Thus it often has debt burden, or is the asset disposed of when they go into care/live with family. Or even for reverse mortgages. The big rest home companies often just run a bill for their care services, and then bill the estate when that person passes away.
More often than not the average parent has been asset stripped by the sharks well before their family get a chance at whats left.

by Les Rudd | 10 May 12, 2:53pm

Useful article. Plus I had to

Useful article. Plus I had to look up the word cacophony and so have learnt something today.... It's a multi-causal problem and PhilB and I hadn't covered them all here:

http://www.interest.co.nz/property/58793/productivity-commission-recommends-immediate-release-land-residential-development-auc#comment-679619

However, the main problem is, no one is doing much of substance about any of the causes and so nothing will change.

Who benefits from that outcome?

Cheers, Les.
www.nzmea.org.nz

by Elliot | 10 May 12, 2:55pm

Hi Olly, If residential real

Hi Olly,
If residential real estate isn't on the cards, what are good entry level commercial real estate opportunities for someone in their 20's living in Auckland?
Should you be looking at retail shops, small offices or small industrial warehouses?
Thanks,
Elliot.

by Kiwidave | 10 May 12, 3:28pm

What's going on? Seems the

What's going on? Seems the typical familly used to be able to afford the typical home, the sewerage and water schemes got done at reasonable prices and paid off in short order.
Now the councils are adding years worth of wages to the cost of building and they're deeply in debt as well. How much money is being wasted on consultants, planners and council parasites before anything even starts to get built. It didn't used to be this way. Look at the Mangawai sewerage scheme and how it has virtually bankrupted an otherwise prudent council.
Have we become so in love with complexity we can no longer afford our own bullshit.

by iconoclast | 10 May 12, 7:01pm

Yes, Mangawhai. An

Yes, Mangawhai. An interesting example. Know of a couple who have a 10 hectare block there and decided to subdivide off two sections of 1 hectare each for their two children. 7 Years ago. And still waiting. They still don't have approval or consents. All because of the sewerage scheme. 7 Years in limbo.

by Hugh Pavletich | 10 May 12, 3:53pm

PARKINSONS LAW

PARKINSONS LAW RESEARCH

Here is something for you academic types on this issue (h/t Nick Lynch Cantabrians Unite) - "Parkinsons Law Quantified" -

http://iopscience.iop.org/1742-5468/2009/03/P03008/fulltext/

http://en.wikipedia.org/wiki/Parkinson's_law

In essense - poorly governed bureaucracies are a cancer on a democracy. We dont want to let things get out of hand to the extent of the British situation in Local Government. Read the article of 2 years ago in the UK Daily Mail "The Inertia Sector" . Its a real hoot -

http://www.dailymail.co.uk/news/article-1289702/Public-sector-inertia-council-office-employees-month-sickies.html

Hugh Pavletich
www.cantabriansunite.co.nz
www.PerformanceUrbanPlanning.org

by Hugh Pavletich | 10 May 12, 4:08pm

HEALTHY HOUSING MARKET

HEALTHY HOUSING MARKET DEFINITION

Anyrthing over 3 Median Multiple is in bubble territory - refer www.demographia.com .

A clear definition of an affordable housing market from Performance Urban Planning -

DEFINITION OF AN AFFORDABLE HOUSING MARKET

For metropolitan areas to rate as 'affordable' and ensure that housing bubbles are not triggered, housing prices should not exceed three times gross annual household earnings. To allow this to occur, new starter housing of an acceptable quality to the purchasers, with associated commercial and industrial development, must be allowed to be provided on the urban fringes at 2.5 times the gross annual median household income of that urban market (refer Demographia Survey Schedules for guidance).

The critically important Development Ratios for this new fringe starter housing, should be 17 - 23% serviced lot / section cost - the balance the actual housing construction.

Ideally through a normal building cycle, the Median Multiple should move from a Floor Multiple of 2.3, through a Swing Multiple of 2.5 to a Ceiling Multiple of 2.7 - to ensure maximum stability and optimal medium and long term performance of the residential construction sector.

........if there is any part of "3" your Central or Local Government politician doesnt understand - please explain the above slowly to him / her......and for good measure tell them about the significance of the creators of the modern housing production industry Bill and Alfred Levitt -

http://tigger.uic.edu/~pbhales/Levittown.html

Housing affordability is a "nonsense issue". There is nothing to "invent" here. Just a matter of sorting out government losers really.

Hugh Pavletich
www.cantabriansunite.co.nz
www.PerformanceUrbanPlanning.org

by MortgageBelt | 10 May 12, 5:55pm

Regardless of the drivers,

Regardless of the drivers, and the high income multiples - you are still better off by buying a good home in a good suburb. Its a hedge against inflation, high rents, & unwelcome changes. A home is a better place for your money than shares (87), kiwisaver, bank deposits (low), etc ...

by Hugh Pavletich | 10 May 12, 7:03pm

Mortgagebelt - you obviously

Mortgagebelt - you obviously need to talk with the Californians, Floridians, Irish and Spanish and others.

Bubble value is not real wealth. Just fools gold.

by MortgageBelt | 10 May 12, 7:15pm

Our salaries (Bubble) [cf to

Our salaries (Bubble) [cf to India/China/Poland], Groceries (Bubble), Petrol (Bubble), Electricity (Big Bubble), Broadband (Bubble), Rents (Huge Bubble)..... You'll need to be Beansprout living in the DoC hut on the West Coast to get out of the Bubble ....
ATM Bubble is all we have ....
Just because you recognise a Bubble doesn't mean you can avoid it ...

by mist42nz | 10 May 12, 10:45pm

my "bubble" is powered by

my "bubble" is powered by available funding (needed by commercial and financial sectors to exist) and by the margin that is created by bureaucracy (pushing new developments ever higher).

Because I have yet to see bureaucrats effectively decrease overheads and they're the main driver of the soft market. I think it's not much of a bubble. Expensive, yes. Inflationary, totally.
pop-able - wot with bureaucrats making cheaper simpler systems and governments costing less; and the financial/commercial market cutting it's own throat by not offering new business to customers..... nah don't see it popping anytime soon....

by mist42nz | 10 May 12, 10:19pm

However you can still live in

However you can still live in your bubble.
Which you can't with shares and kiwislaver etc.

Just waiting for the rates to go over 50% of rental price.... that'll make people jump. and given the debt levels of local councils and their attitude to ever increasing rates it's only a matter of time....

Be interesting how the freeholders vs the renters stack up then :)

by PhilBest | 11 May 12, 5:04pm

I agree that Kiwis will have

I agree that Kiwis will have to revolt on the subject of rates sooner rather than later. Why do Kiwis keep right on taking this nonsense? The single worst problem, if you look at the accounts going back decades, is the cost of public transport subsidies, especially if rails are involved.
Public transport is one thing that, in contrast to cars, electronics, food, and clothing; has become steadily more expensive relative to incomes rather than cheaper relative to incomes. The amount of subsidies required has gone up faster still because policy makers insist on keeping the fares "competitive" with cars.
If you do some basic maths; if you are catching a train and paying $3, and the subsidy is $7 (pretty much the norm); then the true cost is not a lot different to running a reasonable car like a Toyota Corolla. Decades ago, the real cost actually WAS a lot lower than running a car, and the 2 costs have steadily "converged" in spite of rising oil prices.
This may be largely a consequence of the grossly inefficient model on which most public transport is run. The simple reason that it is illegal for anyone to run a 10 seater van in competition to the public monopoly, is that privately run 10 seater vans would KILL the public system for efficiency; fares, even unsubsidised, would be lower and the operators would still actually make a profit.

by Justice | 10 May 12, 6:58pm

"However let me tell you that

"However let me tell you that it’s not ‘speculators’ who are driving up the price of property. Indeed, they are more likely driving *down* the price of property! For speculators can only really thrive by fierce haggling in order to buy at bargain prices."
Some smug idiot doesn't even have the IQ to know the meaning of "speculation".
My god, Olly, why don't you go buy yourself an island and stay there? Then the rest of us who aren't necessarily just "out for ourselves", who BELIEVE in "communities" and a society driven not just by a global ponzi monetary scheme can get on with making the world a better place for the next generation?

by Justice | 10 May 12, 6:58pm

"However let me tell you that

"However let me tell you that it’s not ‘speculators’ who are driving up the price of property. Indeed, they are more likely driving *down* the price of property! For speculators can only really thrive by fierce haggling in order to buy at bargain prices."
Some smug idiot doesn't even have the IQ to know the meaning of "speculation".
My god, Olly, why don't you go buy yourself an island and stay there? Then the rest of us who aren't necessarily just "out for ourselves", who BELIEVE in "communities" and a society driven not just by a global ponzi monetary scheme can get on with making the world a better place for the next generation?

by waymad | 10 May 12, 8:53pm

Well done Olly: and not a

Well done Olly: and not a bad thread to follow, either, chaps and chapesses.

As Hugh P has pointed out, wearily, for the umpty-umpth time, there's no magic in the solution. A lot of vested interests in the path, yes, but nothing a CERA doesn't have the legislative steamroller to flatten. It's as simple as doing away with the urban limits (squiggles in maps, clearly delineating the no-go areas (high-value horticultural soils, liquefaction-prone areas - something a competent set of starving post-grads could rattle together for Christchurch in a week or two) and using a sensible financing model for incremental changes to infrastructure.
As for the ridiculous notion put up by some common tater about new entrants having to 'buy their way in' to the commons - to pay (again) for sunk costs such as libraries, reserves, community centres and other fixed plant: ferchissake, learn some accounting and read a few LG financial statements.

You'll discover that these costs are constantly amortised (look for 'depreciation') so as to spread the original cost over the relevant remaining life. And this has the effect of retaining cash for replacement of said assets in the organisation.New facilities, which tend to be more functional than the old ones they replace, cause spikes in the financing needs (cost more than the retained cash) and the best model for dealing with this is the loan/bond market, which allows the cost to be spread over the whole rating base. Because, folks, when you read the fine print, you will discover that built into Rates, is the financing for the loan servicing of the Costs/depreciation of the assets.

So making folks buy their way in by various forms of Development Taxes, is quite simply double-dipping.

And Olly's main point - that taxes such as these can distort, prevent and generally foobar development - is surely clear from the woeful pace of the housing rebuild around Christchurch. Development taxes were quoted just this week, by Mike Greer of the eponymous MG Homes, no less, as $75K per house.

Facts, facts. They do tend to intrude upon airy theories, eh?

And of course all of this is such ancient ground: William Rees-Mogg nailed it in a (now pay-walled) Times article years ago which I quoted here, and I am assuredly not the first - try e.g. Not PC....or Doctor Housing Bubble, and my own now venerable experience in LG....

by Hugh Pavletich | 10 May 12, 9:51pm

Waymad - very good points

Waymad - very good points indeed. You would have recieved from me yesterday a copy of this "epistle", which is up on the Cantabrians Unite www.cantabriansunite.co.nz facebook page......dealing with "matters Christchurch". Other interest co nz readers may find some of the pointas raised of interest...........

CLARIFYING CANTABRIANS UNITE OBJECTIVES (EXPANDED VERSION)

No doubt Cantabrians Unite facebook readers will note some confusion following The Press article on the protest about the Objectives of Cantabrians Unite. You will be aware a number of people were disappointed we didn't bring insurance, CERA, the Government and other matters in to it as well.

Some 2 weeks prior to the protest a "Message from the Cantabrians Unite Team" was posted up on the Cantabrians Unite website -

http://www.cantabriansunite.co.nz/Message-from-Team/

....where it was clearly spelt out throughout the last few paragraphs, why the focus must be on restoring the Council back to health first - to allow a recovery to get underway. If the Council is not sorted out there will be no recovery, as people and businesses in the "flight to affordability" hollow out Christchurch to more affordable locations, such as Waimakariri, Hurunui, Selwyn and elsewhere.

The "build / consent rate per 1000 population" is the best measure in gauging this. Last year on this basis, there was 5 times more residential building going on in Selwyn and 6 times more in Waimakariri Counties than there was in Christchurch. The March 2012 Statistics NZ figures illustrate the situation has worsened dramatically with 10 times more consenting in Waimakariri in comparison with Christchurch.

No wonder the Waimakariri and Hurunui Mayors are expressing alarm - urging the Government to deal with the serious shortage of land supply on the fringes of Christchurch. Mayor David Ayres of Waimakariri articulated this very well on Canterbury Television recently when interviewed by Gracie Fea –

Mayor David Ayers Waimakariri Mayor Housing Crisis.mp4 - YouTube

Recently, Hon Bill English, Depity Prime Minister and Finance Minister was reported within –

EQC guarantee to cost 'billions' | Stuff.co.nz

“In the future it would be very important that the decision makers and decision processes for the Canterbury rebuild focuses strongly on what it would take to attract investment into the region, both in terms of the household and business sectors.

"In the case of the household sector, having affordable housing in Christchurch will be the single biggest determinant of the population of this city in the next 10 years because housing affordability in New Zealand is way out of line ...

"In Christchurch we have an opportunity to create affordable housing and that will certainly attract people.

"With respect to the business community, the planning processes, in particular up until recently, have lacked a strong focus on who actually rebuilds the city.

"It's not the planners ... what rebuilds cities are investors who will take risks."

Christchurch needed to have a very strong focus on the fact it was "open for business" and it would make it as easy as possible for outsiders to invest. “

There are diverse constituencies out there fearful of a new fresh election to "clear the air" and get the Council sorted, so a belated recovery can get underway. Particularly the current crop of generally inept Councillors, who are working furiously behind the scenes, endeavouring to influence others why there is no need for a fresh election.

Most of these current Councillors (with the gravy train Directorships and RMA Hearing rorts) are pulling north of $100,000 a year - and understandably - are in no hurry to lose this income flow.

Ask yourself how many of them would earn $100,000 a year plus elsewhere?

There is your answer.

It is very clear that a fresh election is essential and it is most interesting in my discussion with a number of these Councilllors when discussing this issue, that they are clearly NOT interested in putting the wider public interest before their own personal interests. Even those trained in morality (you know who I mean)!

The same ones I might add are talking drivel on housing issues as well. We know exactly what the problems and solutions are. There is no need whatsoever for political play acting talkfests by snake oil salesmen on this hugely important issue. Just "follow the numbers" (refer www.demographia.com ) and read Dale Smith, Convenor of Cantabrians Unite Affordable Land Groups recent article "How to achieve $50,000 sections" on this issue -

http://www.cantabriansunite.co.nz/resources/file/Achieve-$50,000-sections2.pdf

Indeed - I wrote about this issue with respect to Christchurch back March 2010 - some 6 months prior to the September 2010 earthquake events with "Houston: We have a housing affordability problem" -

http://www.interest.co.nz/news/49029/opinion-houston-we-have-housing-affordability-problem

So our problems are "political" in the broadest sense of the word, where the inept old guard are fighting like hell to protect their positions and privileges. All perfectly understandable - and no one should be surprised by this. It is very important however for people to make the effort to better understand the political games being played by the old guard, in their vain endeavours to protect themselves. The wider public interest is the least of their concerns.

Hugh Pavletich
Coordinator - Cantabrians Unite
www.cantabriansunite.co.nz
www.PerformanceUrbaPlanning.org

PS: Watch Television One Close Up Wednesday 9th May Item “Christchurch house moving nightmare . And CERA boss Roger Sutton floundering........in the Bungling Bureaucrats Paradise

by mist42nz | 10 May 12, 10:38pm

"You'll discover that these

"You'll discover that these costs are constantly amortised (look for 'depreciation') "

Welll golly gee waymad...
That must be why the local library (which we're still paying the last amortised bill for), just got another make over this year... and since the money's tight, they amortised that too. So when they want to do a new look to it in 5 yrs time... we'll still be paying for both those bills. So do you think they'll have the money to pay cash for the do-up next time, since they're still paying the last two and the debt servicing? Yeeah Right.

Why do you think your power prices are so horrendous.
When I worked a local power company 20 years ago, they amortised all the line and transformer charges. And they had done that for 30 years before that so for 30years theoretically a small amount of depreciation was matched with revenue prices for the improvement and future replacement of assets. Yet when the day came there were no funds in the bank, and the projects got amortised. And again, now they're looking at more alternative generation, is the money coming from a the development portion of the retail price?? Noooo It's going to be borrowed and amortised.
So all the assets which should theoretically have paid themselves off - and have enough in the bank for cash paid replacements..... and thus provide cheaper power than ever - are costing more than ever. And that proof is in the pudding. With the assets amortised, costs should drop (or wages/profits should skyrocket).... but they haven't.

Also urban limits and financing models won't work alone. They're two critical points but they need two more: better quality workmanship from NZ suppliers! and less 'nil return' overheads. It requires all 4. 3 on it's own will just be like a table built in NZ.

by PhilBest | 11 May 12, 5:15pm

The equity issue arises re

The equity issue arises re development contributions because
1) everyone so far has "paid as they go". People paying upfront now are still expected to pay in to the "pay as you go" scheme as well for the rest of their lives.
If you really are correct that paying upfront is the best way, then everybody in houses right now should be socked their fair share $80,000 or so and rates themselves should be partly abolished, and then everyone is in a roughly similar fair position.
2) as I have said again and again and again and you take no notice, the fees push up not just the price of new houses, but the price of all houses, thus penalising everyone who buys their first home, regardless of whether it is a new one or not. Therefore it is not just the people who buy new homes who are paying "up front" AND "ongoing"; it is every first home buyer.

by Basel Brush III | 10 May 12, 9:03pm

Olly, You see we are not

Olly,
You see we are not always against you.
Facts speak for themselves.
Opinion is where you can let you and your readers down.

by Hugh Pavletich | 10 May 12, 10:07pm

THE CANCER OF BUREAUCRACY -

THE CANCER OF BUREAUCRACY - BRUCE G CHALTON

In case you haven't read this.....

http://medicalhypotheses.blogspot.co.nz/2010/04/cancer-of-bureaucracy.html

by bigblue | 10 May 12, 10:16pm

In Auckland City the Res 5

In Auckland City the Res 5 and Res 6a zones permit subdivision if they have total 1000m2 or 750m2 respectively. If the restrictive Auckland Council altered both those zones to say a minimum lot size of 250m2 or 300m2 then thousands of sites could be created in Auckland City within 7kms of the City centre and close to main transport routes.
The problem that Olly illustrates would still be there ie excessive costs - a builder acquaintance was recently quoted the following to create a site at the rear of a bungalow in central Auckland:
Surveyor $12,000
Services, power, phone, sewer, storm water, drive $38,000
Resource Consent $9,000
Council contribution $30,000
LINZ $1,000
Lawyer $2,000
Geotech Report $2,000
Planner $4,000
Traffic study $3,500 (site is near a busy intersection
$6,000 Fencing division between front house and rear lot.

Total $107,500 plus GST
Estimated time to obtain separate title - 9 months!
Market value of the new site approx $350,000 so still worth doing although the value of the existing home would reduce.
If the Res 5 and Res 6a zones allowed 250m2 or 300m2 lot sizes then additional supply may see value of such a site drop perhaps $100,000 but there would still be a decent margin available.
So what's stopping Auckland Council making such a zoning change? They would receive more rates and for every 100 sites created they would pull a $3,000,000 contribution.
They appear set on allowing small lot sizes on the fringes ie Hobsonville which only contributes to a greater traffic problem.

by mist42nz | 10 May 12, 10:24pm

location vs traffic is one

location vs traffic is one possible value for going up.
Relations living in Sydney didn't have car or parking because they lived in apartment block near work (kids had moved out). Comparing the lost time in transmute and expense of having 2 cars in the city, inner city living was a good deal.
But there does have to be infrastructure properly designed and price to make it worthwhile.

by bigblue | 10 May 12, 10:39pm

Another ridiculous

Another ridiculous requirement in Res 6a and Res 5 zone is that you must have two car parks for each lot - crazy!

by mist42nz | 11 May 12, 12:22pm

crazy indeed. Shows how out

crazy indeed. Shows how out of touch with modernisation that the bureaucrats are.

by PhilBest | 11 May 12, 5:20pm

Urban land rent curves always

Urban land rent curves always slope up towards the centre at a sharp enough rate, that child raising 2 parent households are never prepared to "trade off space" at the amount necessary for them to be able to afford it - even if "transport costs" are lower.
Add the fact that the international average for CBD employment as a regional share is around or below 20%, the "inner city living is the cheapest option" argument is about as relevant as the Brontosaurus.

by bob | 11 May 12, 9:40am

Changing or deleting the

Changing or deleting the density table in 7.7.2.1 and deleting 2 cars/residential unit is the most sensible first step Council could make to address housing affordability. It wouldn't even change the 'look' of those suburbs as the bulking/landscaping rules control that.

However NIMBYS etc. are terrified of density as their small brains thank that suburban sprawl and hong kong style apartments and they only options. Council respond to NIMBYS.

Council apparently philosophically against in-fill housing (because in the past some of it has been ugly - in order to comply with their rules). They want comprohensive developments on large sites so they can be heavily involved, at great expense, in the design. However there's not many of those sites around so nothing will happen.

by PhilBest | 11 May 12, 5:26pm

It is absolutely absurd that

It is absolutely absurd that council planners want to restrict fringe growth and promote infill development, yet they are unable to "smash through" the obstructions to infill development that mean that it simply is not available as a "option" to the house hunter as yet.
If "saving the planet" is what is at stake, then surely a bit of "eminent domain" and total set-aside of NIMBY objections is in order? Otherwise, the planners should piss off out of the lives of ordinary families who just want somewhere affordable to live. These people have the shamelessness to say they want to "increase housing choice", by changing the options from $200,000 suburban home or $200,000 CBD apartment, to $450,000 suburban home or $900,000 CBD apartment.
FFS, if I was NZ's Lee Kuan Yew I would not just sack these people, I would prosecute them.

by Matt in Auck | 11 May 12, 5:41pm

A huge part of the problem is

A huge part of the problem is that not only have the planners limited greenfield development, they have also heavily limitted intensive housing!!!!! How dumb is that! Any surprise that housing construction is miserable and affordable housing is rare as hen's teeth?
The Council's new unitary plan is supposed to come out later this year, let's hope they get their act together

by BigDaddy | 10 May 12, 10:24pm

I have just read Olly's

I have just read Olly's brilliant piece and he has hit it on the head well and truely.
He is, I am sure, very pleased to get so many richly deserved compliments so he will no doubt, be straight into writing some more very shortly.
Some of the subjects he may touch on concern the up coming budget in a couple of weeks.
He thinks there could be some more turns of the screw aimed at porperty investors e.g. deductions further limited by fiddling with interest paid, disallowing some GST claims, or re- introduction of stamp duty (which is still operative) and the like?
All good news for him for sure. Any such moves will only tighten up the rental maket even further.

by Henry_Tull | 11 May 12, 12:50am

Does household debt amplify

Does household debt amplify downturns and weaken recoveries?
Refer Chapter 3: Dealing with household Debt
http://www.imf.org/external/pubs/ft/weo/2012/01/pdf/text.pdf
Based on an analysis of advanced economies over the past three decades, we find that housing busts and recessions preceded by larger run-ups in household debt tend to be more severe and protracted. These patterns are consistent with the predictions of recent theoretical models.
Based on case studies, we find that government policies can help prevent prolonged contractions in economic activity by addressing the problem of excessive household debt. In
particular, bold household debt restructuring programs such as those implemented in the United States in the 1930s and in Iceland today can significantly reduce debt repayment burdens and the number of household defaults and foreclosures. Such policies can therefore help avert self-reinforcing cycles of household defaults, further house price declines, and additional contractions in output.

by PhilBest | 11 May 12, 5:32pm

It would be nice if all the

It would be nice if all the highly paid experts in the civil service etc actually bothered to ring alarm bells when this problem was building up, not suggesting afterwards that debt needs cancelling to resolve the effects of too much of it.
Every responsible person in the Cullen years who did not ring alarm bells about the shrinking productive sector and rising household debt while the economy appeared to be ticking along nicely, should be prosecuted for negligence. Especially Cullen.
Every other finance minister NZ has ever had, would have noticed the trends and acted accordingly. If Cullen noticed them, then he deliberately maximised the damage that the following administration would have to cope with by entrenching exorbitant State spending levels.

by mist42nz | 13 May 12, 7:20am

Part of the big problem there

Part of the big problem there Phil, is that those people are the ones that don't think there's a problem.

They're more often "doing -their- job" and "we're do the best we can", and they're "Following the rules & laws".
Sometimes there are also reasons why they legally aren't allowed to criticise the system they are part of or the leaders (NZ Police & WINZ being classic examples) even in other places we see harsh treatment of "whistleblowers".

So part of it is oppression,
But much of it is that they're brainwashed/trained into following protocol and ignoring observation; into becoming apologetics and disclaiming against critical thinkin/logic. Why would they do this? Survival (and laziness?) - for them to get ahead in their career for them and their families - it's about joining the right gangs. Promoting outsider interests (ie customers) and arguing about poor metrics and dodgy philosophies is a fast way to get kicked to the fringe by the top gangs, and being such an outsider is not a place of power for most people, and often such a person faces shunning from the other corporate parasites.
This is why I challenged the correctness of your "median ratio". It's not realising the inaccuracy and inappropriateness (at that level) that is epidemic to the civil service (etc) and the tendency for those people to likewise grab any "accepted practice" that is in a book or said by a university/political lecturer and use it as a self-reinforcing Truism. (we use it because everyone uses that one ... that one is true because everyone is using it)

by PhilBest | 14 May 12, 3:46pm

Median Multiples are NOT part

Median Multiples are NOT part of the problem of status quo inertia. They are a warning sign that no-one has been paying any attention TO. The status quo inertia you are talking about, has ignored rising median multiples and rising mortgage debt and rising equity-cash-out spending and debt.
I am not so willing to excuse "the establishment" for being so b----y clueless over all this. The idea that "this time it's different", and the party will never end, never had the slightest justification even on the most basic vital statistics available to everyone. But it is not "everyone's" job to follow them; that is what we elect governments for and appoint finance ministers for.
Michael Bassett pointed out that if, during the Lange cabinet era, anyone among them had suggested that Cullen was the man among them who would be a future finance minister, the place would have collapsed with mirth.
Some of the famous economics and current affairs information providers should actually pay a panel of grandmothers to assess the basic data; they would do a better job.

by waymad | 11 May 12, 10:05am

mist42 - good points, but

mist42 - good points, but look at the context you are attempting to draw parallels with.

Power generation and distribution was a State function (in the sense of a Gumnut Department) until quite recently (in terms of the life of the assets involved). Capital works were conceived, considered and allocated in an intensely political atmosphere. So, inevitably, there was under- and mis- investment. I was a Post Office engineering cadet back in those days and the Regional Engineer always said - ferget the engineering, lad, it's all aboot the politicians and the money.

When those assets were SOE'ed and more sensible accounting introduced, including such innovations as asset registers, asset maintenence programmes and capex schedules, hey-ho, it was duly discovered that the aforesaid misallocation had left a deep legacy of dodgy plant, a complete lack of current technologies such as SCADA, and the general need for a catch-up. Which has duly occurred.

So one rather spots the difference between LG foobarring of land allocation, and a much deeper power-sector issue of catching up to current demand, technology and practise. The first is driven by planners who frankly couldn't plan their way out of a wet paper bag, who have inherited the fads of their academic teachers, and who (thanks to Sandra Lee's disastrous 2002 LG Amendment Act which handed these fools real power) can go about their well-intentioned but economically dopey tasks unhindered by thoughts of housing affordability, time value of money, or effect on ultimate purchasers. The second is driven by engineers who know how to count, are acutely tuned to their markets, and who have the sense to call in others for the heavy lifting when needed.

So to conflate these two sets of circumstances is not exactly a great rhetorical device, hmmmm?

by mist42nz | 11 May 12, 11:32am

We did have a couple of

We did have a couple of dinosaurs who said they've got power (some of the time) so they [customers] should be bloody content about that. But they were about when old "Reddy Kilowatt" was the logo/mascot.

A lot of the original roll out was quite well thought out, and amazingly well executed given the equipment and materials - for the rural electrification and national grids. Likewise the generation quite well managed for it's day and age.
It was the "son of sam" types who received that legacy that were the real crazy - it's like what they say about second/third generation wealth. Since they never built/designed it they don't understand it's needs. The the politician/oversight folks were The Worst. They saw money in the bank (from depreciation) and would scream cut prices, cut prices! You're overcharging. At the same time we had compulsory unions, and they were screaming pay more, more perks (thinking back what some of those perks would have been worth under FBT and other claswback systems). So they stripped the cupboards bare.
The first powerboard I worked for had quite a few residential properties in it;s asset lists... because back in the day it was common to offer staff, especially lines folk and/or their families company accomdation to defray travel and living expenses. It was tough stuff, cheap, draughty, no insulation like everything else and occasionally shared with another family (but back then it was common for the boys in the family to be bunked outside in a rough-built whare/bunkhouse - no power, and sometimes no door. far cry from the modern TV, xbox and computer in your own room!) But it was so weird when I started work the Treasurer was doing up these houses and floggng them off to balance the accounts, because the political forces demand low prices and high wages.

As for capital investment. (and my uncle work in post office (wayyy back) and a mate became line staff when he left skool). There was never anything left in the pot. What the politicians didn't promise away, the unions demanded in wages - there was no sanity in the demands. You have money therefore you can pay. Thoughts of building a financial position were blasphemy.
That also happened to my local council 20 odd years ago. Realising the danger of debt, they decided to hold off spending, lift rates, and built a suplus, which they invest on term desposits in several banks. But someone found out that they had 1 million squirrelled away paying them $70,000 a year. And this was being used to fund some arts work and pay a couple of older staff for routine work (grading roads IIRC). The local and central politicians got hold of this news and did their war dance. The council was forced to spend (or face confiscation) the whole lot. They were politically not allowed to reduce the rates (grandfathering the money, as this was consider advantageous to modern ratepayers over the ratepayers who had paid too much) so were told they had to spend it,and they had 2 years to do it. So they did a whole bunch of roading and some grants - however once the nest egg had been destroyed, the rate payers suddenly were faced with increasing rate hikes, part from no real working capital - and part from price of ownership from all the new works.

But back to the power boards, yeap I was literally one of those on hand pushing for the technology used in administering call traffic in Telecom Hamilton, into the local power board. I had to fight the expert engineers who said thats phones, low voltage easy stuff, where we were high wattage. I pointed out every call is precision connection and each "call" is like a "kilowatt" for us, it's all load, and it all is precision montoring and switching, just a matter of putting in the right tools where needed.
However, at the time I was loading load information into Excel 2.0 so the feeders and utilisations could be _actually_ measured - and my boss and my bosses boss actually gave me an actual verbal warning for sitting ("playing") at the computer all day "instead of working". I was 90% complete on the data entry after 4 days before I got told that I may not use the PC. I then spent the next 5 working days, doing the last 10% manually on paper - and got *literally* congradulations on my improved work. This finally gave the newly implimented :"commercial division" the first actual recorded insight into what loads and utilisation was on,and available, to each line. This calculation had never been done before - as each load and line had engineers calculations on what the "correct" size was for each load.
For the curious, I was later fired for reading my home internet-email on work computers after hours. And using a computer as a server to allow people to use their outside computers and modems dial up the a power company PC to exchange email, forums, (one) online game, and as a test bed for dial-up remote information about the power company (also test bed for putting dialup servers on site for meter and spot load monitoring).

The problem is at the top. It's with those in power. But likewise, until the consumers actually start learning and taking interest in managing their own affairs (rather than letting folks like unions and media run their lives), things are truly stuffed.

by PhilBest | 14 May 12, 3:51pm

I would like to see the

I would like to see the energy market "vertically deregulated" so there is not the disconnect between generation and the consumer.
I would like to see the people near a new hydro dam project being able to buy cheap electicity from that project once it is completed.
There is currently no dis-incentive to NIMBYism because of the inflationary effect that anti-progress ideology has on energy prices (and resource prices and national income and economic productivity and traffic congestion and a whole host of other things).

by meh | 11 May 12, 10:26am

A lot of the BS must

A lot of the BS must start with the land value/price & the allocation of costs.
I realise there are a number of variables but just looking at some simple numbers here I don't understand the discrepancies.
On the western fringe of Auckland are two blocks of land, same size, same amenties and services and both zoned lifestyle. Based on recent valuations one is valued at $41 sqm and the other $28 sqm.
Further down the road is the Hobsonville Point development zoned multi units. Most recent valuation works out to be $48 sqm, unfortunately I am not privy to the deal between govt and developers for this site. I am aware that there are additional costs of this development to be allocated but most recent sections for sale are at $328,000 for 450 sqm which is a huge increase.
Across the road from here are two lots side by side. One zoned lifestyle at $68 sqm and one zoned multi use within commercial $16 sqm based on latest valuations.
Within MUL in the same area existing land values (old developments) are valued between $200 sqm to $400 sqm and of these the smaller the section the higher the sqm value.
I understand that govt valuations are only a benchmark but is there an issue with how the land is valued in the first place?

by jh | 11 May 12, 11:23am

Olly Newland says building

Olly Newland says building reasonably priced housing is a dying business, strangled by regulation.
Interpretation:
Olly Newland says property investors part of the solution not part of the problem.
Synopsus:
It all comes down to overcharging by councils.
===========
Opinion: Quite likely there is a degree of truth here as when a television personality gets in charge and buys the Ellesmere flower show*

However
We have seen a period of great tax free gains going to property owners. This was supposed to be part of a cycle where things come back to a norm but it hasn't happend. Why?
Possible factors (ignoring money supply and pork barrell tax treatment):
a) We now live in a globalised property market: Harcourts showcase $800million of Property at Shanghai symposium (etc).
b) It is a given (as in the Auckland Plan) that (e.g) where as pakeha are now 60% of the population by 2121 we will be 48%. The potential of well healed purchasers flowing from developing to developed countires is percieved to be enormous. left and right have a concensus that immigration will never be an issue; you may as well try to stop the Waimakarrri (potically speaking).
C) as the Savings Working Group pointed out we have had the 2nd highest rate of immigration in the OECD; immigrants require infrastructure immediately. The combination of high immigration and a low wage economy has led to a need for greater development contributions.
The idea that it is all about land supply is a meme being pushed by those Julian Simon libertarians who believe that we live in a system where there are no limits (All watched over by machines of Loving Grace). The Demographia crowd have been pusing this line, they confuse development land with space and obsufucate thedevelopment contribution thingy by telling us about sexy MUL models and Houston Texas.
As we know there is no such thing as a free lunch and as far as I can tell the Houston model is private funding with minimal services and if a neighbourhood hasn't got it then it is assumed it doesn't want it: in other words economic rationalisation, or, poor communties "failure to value" their own infrastructure.
Professor Albert Saiz has thrown some doubt on the land supply did it meme as in:
I process satellite-generated data on terrain elevation and presence of water bodies
to precisely estimate the amount of developable land in US metro areas. The data shows that residential development is effectively curtailed by the presence of steep-sloped terrain. I also find that most areas in which housing supply is regarded as inelastic are severely land-constrained by their geography. Econometrically, supply elasticities can be well-characterized as functions of both physical and regulatory constraints, which in turn are endogenous to prices and demographic growth. Geography is a key factor in the contemporaneous urban development of the United States.

http://real.wharton.upenn.edu/~saiz/GEOGRAPHIC%20DETERMINANTS.pdf
The Saiz paper is becoming part of the lexicon in pointy head circles.
http://realestateresearch.frbatlanta.org/rer/2010/06/explaining-local-supply-elasticities-quantifying-the-importance-of-space-limitations-in-housing-pric.html
but has created a whoof! from Wendell Cox:
https://www.econjwatch.org/file_download/472/CoxJanuary2011.pdf

by mist42nz | 11 May 12, 11:44am

globalised property

globalised property market......
hahaha you've been reading too much of your own marketing propaganda.

by snippy | 11 May 12, 11:13am

Government: Is this not

Government: Is this not where the problem lie.
What is the duty of the Government .Are we being sold out because they are governing to benefit only the Rich. Do the people of the country not have the right to be safe in there own homes at an affordable price .To have work, and not be exploited by the employers i.e.: overtime work @ normal rate, no contracts. Cost of living so high that you can not have a family if you and your partner not both work 60+ hours a week .Children be left to fend for them selves.
Our Government is not Governing and we allow them to rape us and our families

by jh | 11 May 12, 11:51am

I get nervous when people

I get nervous when people talk about human rights but I do believe a human has a right to live in an urban environment which isn't deprived of the things nature made such as sunshine, space, ambience, community. Olly's crowd see the neighbourhood as a big lolly scramble; they will cut up ,controll, contract and squeeze the wealth out of the land while living on expansive properties with harbour views etc.

by mist42nz | 11 May 12, 12:15pm

"Right to live in an urban

"Right to live in an urban environment..." (etc)

It's a old truism but always potent.

If it's a Right, where is the Responsibility.
For these things to exist, it increases the price - who pays that price? How much can the payers afford? Will they pay it?

How can any being that considers itself sentient, think that if these things cost to provide (eg space means sprawl and travel, ambience and community mean facilties provided) then when times get tight and costs are an issue, that these desires will not be impinged upon.

That sooner or later, someone or a mob of someones will start screaming that housing is more important than space, hospitals more important that community, wages more important than sunshine.
Because those nice things are pleasant ot have when you've got lesser needs met (like the stupid studies saying "the wage size isn't important...and you know they only asked executives etc with wages over 100k!!") but when you've got sod all, those pleasantries are nice but not as nice as water, food, shelter, clothing. Such needs Rome was build on, such needs are just as true today.

by jh | 11 May 12, 6:03pm

Bollocks =============== busi

Bollocks
===============
business lobbied for more immigration and a changing of the rules that allowed rich elities to pig out on property in countries of which they were not residents.
The problem now is that we have had to provide more and more infrastructure (subsididise developers) which is a drain on taxes and pushes local body rates up.

by mist42nz | 13 May 12, 7:08am

business (across the country)

business (across the country) didn't lobby for more immigration.
politicians (Not Winnie) did.

Those politicians saw cheap labour (the Conundrum File) as the answer, and by bringing in rich foreigners they that was supposed to increase the free wealth (pre-runner to trickle down).

Business said NO. Consumers were still in the dark, after being told "foreign investment will create jobs".
Businesses needed the correct skillsets (rather than a labour pool) and enough tax and interest relief to be able to hire and bond trainees. We lost our trainees to the brain drian, and had to compete with incoming capital and often cheap foreign labour preferred to hire out to people with similar language and culture. Any protest was labelled as racism.
Who were the winners and perpetrators? Politicians and Cronies.

by mist42nz | 11 May 12, 12:06pm

Government is where the

Government is where the problem lies. Buck stops there - just talk to a local utility, council or the likes of IRD. This is "the law" this is the playbook that we follow. Next.

Governments duty is .... to look after their power base or be outsed from power. Fail to understand that reality is to live in a fantasy.

Who is the "we" being sold out? The TV watching couch vegetables slaving away because they're too busy to work out the facts about the world they live in? Livestock are their to be farmed, that is not the fault of a good farmer.

Do the people of the country have a right to be safe at price... NO. the do not, they have the riight to have what they protect - they have the result of following false beliefs by having that price and safety stripped away from them by predators.

To have work? Oh yes they can work to survive. Do they have a right to survive without doing the basic necessities for life?

Not to be exploited by employers? NO. They have the right to put into power and demand accountability - if they can actually MAKE it happen - of people they appoint, that will enforce contract on both parties without prejudice and with proper relevant forensic skills. It is hoped that the people will demand of their representatives that violence and cartels will not be formed to oust competitive employers. Thus if the people take up stupid offers, they have to full their side of the deal - rather than expect someone else to save them from their own stupidity. Meaning , wages is agreed, hours as set down, full contract.

Cost of living so high? NO. They have a right to expect the cost of living to reflect the poor consumer choices and economic environment that they desire. If they are willing to borrow incessantly and demand high specification goods from foreigners, and willing to accept poor or cheap imitations, then they have a right to expect local companies and quality manufactures will fail. And that will result in increasing cost of living. They have the right to expect the consequences of their own actions. And they DONT have the right to expect others to wave a magic wand and fix it for them.

Re: family, working hours, children. Again NO. These are choices and consequences made by these same individuals. You can't expect to be allowed to shit in your own bed and then demand that it doesn't stink. People since humans evolved have been working hard, putting family members to work to get ahead in early adulthood. That is normal natural life, with the self-invest growth phase early on, so that maturity and consolidation phases come later. Without the former, in some form, the later does not exist and your economy will collapse with consequences. People cannot expect and demand to play and get an easy life despite the evidence and natural development patterns, and then demand the Right not to suffer the consequences from thos choices.

Your government IS governing - You clueless retards just don't actually know what that involves because you're too busy in your own fantasy worlds and you get all upset when the reality of the situation that the mob of useless dopey morons has created with your fantasies.

Snippy - your short 7 line comment pretty much sums up EXACTLY all the major factors which are screwing over NZ and much of the developed world. And I will point to those countries whose people do not have those expectations - I point and say - look at those countries, see how there people and economies are growing.
And I point to those countries whose populations have the expectations you have listed - NZ, US, UK, European PIIGS etc - note that all of those are failing!!
It is exactly these unreal and "not my responsibility" expectations which are destroying economies.

by jh | 11 May 12, 11:34am

Affordability freemarket

Affordability freemarket style.
"Christchurch architect Roger Buck, a longtime advocate of sustainable housing, says this could have been the moment to make the move to not just greener homes, but greener suburbs.
More innovative ownership models could have emerged, such as community designs grouped around shared garden spaces.
Instead, all he sees are cookie- cutter estates offering standalone houses on ever-shrinking plots. "They're short-life buildings to begin with, what I'd call stick houses," he says.
They look ritzy when first built, but use flimsy materials and are unlikely to age well.
Also, the sections are too small. Buck says people are clinging onto the old quarter-acre Kiwi ideal, but trying to make it work on half the land. We are building a rash of new suburbs that will never have vegetable patches, proper gardens or the shelter of trees.
"When the easterlies blow through, they will be utterly bleak."
Nor do these subdivisions allow people to capture the winter sun.
"You need do no more than orient your house to the north and that's free winter energy.
"However, developers just chop up the land at random to get as many sections out of it as possible. The house are then plonked down to fit the roads."
Lincoln University associate professor in property studies John McDonagh agrees that people are questioning whether we are building the slums of tomorrow - houses too big on land too small, subdivisions which are tight tangles of roads where the only escape is by car.
However, he says it is unrealistic to expect a radical change in thinking just because of the earthquakes.
"It's a lowest common denominator thing.
"Developers get comfortable building a certain type of product. It's a risk-free approach. They know they can do it."
http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/6865085/Big-ambitions-for-small-sites?

by mist42nz | 11 May 12, 12:18pm

You'd think an architect

You'd think an architect would have a bigger clue.

Dear Mr Buck,
Please send 2 billion dollars from your personal accounts so the people of Christchurch can build the nice houses you mention.

What? You don't have the money?

Well guess what idiot, neither do they.

by jh | 11 May 12, 6:14pm

Here's where the money

Here's where the money went:
"For the housing market’s winners, the gains have been spectacular.
Infometrics director Gareth Morgan calculates that between 1989 and 2005, the residential property market has provided investors - and owners - with a tax-free 319% gain."
http://www.catalyst2.co.nz/blog/news/the-rent-trap/

by Your Landlord | 12 May 12, 4:06pm

And do you know, jh, the

And do you know, jh, the great irony here is that in the year you mention, 1989, the Reserve Bank Act came into being.
So Gareth Morgan came out and said there was no point buying houses anymore because the Reserve Bank Act would stop inflation and so houses would stop rising in price.
Bet you never hear Gareth Morgan reminding everyone of his advice in 1989...

by jh | 12 May 12, 6:09pm

Perhaps he wasn't party to

Perhaps he wasn't party to this:?
New Zealand's change in immigration policy dates back to the early 1990s when the gap in productivity with other nations became pronounced between the years 1970 and 1990. Higher immigration was intended to fix the problem.
In its report, the SWG claims the move backfired.
"The policy choice that increased immigration, given the number of employers increasingly unable to pay First-World wages to the existing population and all the capital requirements that increasing populations involve - looks likely to have worked almost directly against the adjustment New Zealand needed to make and it might have been better off with a lower rate of net immigration.''
The Savings Working Group also underscored the need to remove tax distortions that heavily favoured property investment. Failing the adoption of capital tax, it suggested the only way to reduce the tax distortion on property prices would be "at the very least to reduce taxes on financial assets,'' which it identified as the "main investment alternative.''
http://www.interest.co.nz/kiwisaver/52140/migration-policy-linked-inflated-housing-prices-government-spending-and-low-savings

by jh | 11 May 12, 11:49am

Diddums! Donald Trump on

Diddums!
Donald Trump on Wednesday swept into Scotland's parliament to demand the country end plans for an offshore wind farm he fears will spoil the view at his exclusive new $750-million-pound ($1.2-billion) golf resort.
http://nz.finance.yahoo.com/news/donald-trump-demands-scotland-nix-133251863.html

by Sore-loser | 11 May 12, 7:20pm

Balls......to the FORE. I can

Balls......to the FORE.
I can TRUMP that...
Every single or married Ratepayer and Taxpayer in Dunedin should flounce into the Council Chambers and Chamber Pot the entire piss-pots who pissed away their Rates and then to add interest to injury, bail out an entire Rugby Union, thereby compounding debt, injury and a bigger load of balls-up, all round on the never ending splurge that is a Council Perk in the park to-date.
Never mind a round of golf....how ever much TRUMP personally borrowed, to play around with, this lot were never supposed to play a round with OTHER PEOPLES MONEY.
It is NOT THEIR MONEY.........repeat after me........it is not their business.
It is called fraud, theft and profligate spending.
They have no MANDATE, to waste people munny.
Not unlike John Key, who thinks a Mandate is a way, way forward in the marriage stakes.
Who I might add also thinks a Mandate allows him to dispose of supposed New Zealand ratepayers......ASSETS.....(not unlike a certain Toilet Bowl in Dunedin).
One lot selling em...one lot BUYING em....
OH the POWER.......oh to be a Poll-lie, or a Civil Serpent....wasting the power.
The left pillock, does not know what the RIGHT PILLOCK is doing.
Like-wise....
Every single or married RATEPAYER should flounce into the BEEHIVE and tell NATIONAL to stop playing around with OTHER PEOPLES MUNNY.
FORE.
Fore gone.....conclusion,
Power corrupts, absolute POWER, absolutely Corrupts...Might River Power sellers.
First they borrow, then they splurge, then they set up their constituents to BAIL EM OUT.
Twas ever thus. And at this third rate lot....it always will be.

Compounding problems as they go.....BUT who wins....the round.....
TRUMP THAT.

by Roelof | 11 May 12, 1:17pm

Great article Olly... It

Great article Olly... It pretty says it all... That Watercare example is freaky. !!!!! I thought that sort of gouging corruption only happened in Greece.

by SimonP | 11 May 12, 4:17pm

At some point the cost of

At some point the cost of doing business, in building rental and salary to retain staff with high living costs, must reach a point where business will start to leave the Auckland CBD. I'm surprised it hasn't started in earnest already, given that business involved with information or finance can be run from anywhere. Employees have a better and cheaper quality of life to boot. It really makes no sense to have our primary business hub, largest university and biggest hospitals on such a narrow isthmus of land.

by iconoclast | 11 May 12, 5:30pm

Olly Newland: Wish to add to

Olly Newland: Wish to add to the accolades. Just goes to show what happens when you provide valuable factual info that goes to the heart of the housing problem. Put aside the bluster and puffery and bumph.

by jh | 11 May 12, 8:08pm

Blame the developers for the

Blame the developers for the Kaipara rate rises
=======================================
....Mangawhai is the latest community to be on the receiving end of a Council imposed sewage treatment scheme. The local Residents and Ratepayers Association has called for a Septic Tank Bylaw and is anxious to consider alternatives which keep costs down. However Kaipara District Council, under pressure from the Regional Council to clean up the Mangawhai Estuary, and from developers keen to follow the Cooks Beach example and get intensive subdivision development underway, are pushing ahead with a proposed $16 million sewage scheme. Kaipara District Council have decided they cannot fund the project, and have instructed Beca’s to put the whole project out to private tender. I am advised five private organisations have been shortlisted. These include overseas companies..
it was clear that the fundamental reason for KDC's enthusiasm for a new traditional sewerage system was that it supported calls from land owners and developers who wanted to develop their land, and subdivide down to lots of around 400 square metres. That sort of urbanisation was in conflict with the large lot development that had characterised Mangawhai hitherto. Bach owners and resident lots were around 1200 to 1500 square metres - big enough to accommodate an onsite wastewater system based on a good septic tank and a drainage field. The underlying land being largely sand - drainage was appropriate and effective.

So. Intense urban development proposals required a networked wastewater system - sewers and a wastewater treatment plant - and existing property owners were advised that their onsite systems were polluting the estuary. At the time I couldn't believe the draconian and uncaring way that KDC went about imposing this vision on this seaside community.
//
But the real problem for KDC is that its plans suffered from the collapse of the coastal property market. It installed a wastewater network to support a property boom which never came. It borrowed money, just like all those real-estate investment companies did that went bust. But Councils don't go bust. Well. They haven't yet in New Zealand.
http://joelcayford.blogspot.co.nz/2012/03/mangawhai-bankrupts-kdc.html

by keriwin | 11 May 12, 9:34pm

One of the excessive costs

One of the excessive costs homeowners have to face is the cost of rates. I think it is time we had a real debate about this. We keep hearing about "user pays" and having a fairer system but you cannot use "user pays " fairer system" and rates in the same sentance. We need to change the whole system of "local taxes".
Up here in the Far North we are told that 60% of our rates are spent on roading so how many car users are paying that cost? Also we have a lot of ancestral land that makes the collecting of rates very difficult.
The only "fair" and "user pays" way of collecting the money needed is to put a tax on diesel and petrol. As an example, why should an old lady on a pension living alone and only going to the shops once a week in her only car pay the same as her next door neighbours who happen to be a couple with two adult children all owning a car and using them every day. She is paying four times as much and that is clearly "unfair" and certainly not "user pays". This is only one example of how wrong this old system is. With modern technology a better way must be possible.
Please make this a topic on this site.

by iconoclast | 11 May 12, 10:02pm

Petrol is not a good

Petrol is not a good example

Petrol excise is charged on all motorspirit and its value is used to fund the national roading construction. Diesel however is not taxed at point of sale and road user charges are payable on all diesel powered vehicles.

What you are reaching for is called a "Poll" tax but that didn't get off the ground in the UK when Thatcher (I think) proposed it.

by Kate | 11 May 12, 10:37pm

Central government however

Central government however only funds local roading costs/maintenance to roughly 50% (some places a bit more some a bit less) - so local ratepayers do pay the balance through their rates. Hence Keriwin does have a point - there isn't a great deal of user pay-type equity associated with their funding.

Roading is the single largest budget line item in most local authorities I know - and the Far North District is particularly hammered given the vast distances and hence large roading network it has - in comparison say to the Kapiti Coast District (which you can drive through from north to south in about 1/2 an hour).

Local petrol taxes were muted by the ARC, I believe, before the SuperCity came in - but haven't heard much along those lines more recently.

by keriwin | 12 May 12, 5:37pm

Sorry you are wrong. The

Sorry you are wrong. The taxes you are talking about are for State Highways. Rates are used for non state highways. Was my veiw fair?

by iconoclast | 12 May 12, 7:20pm

Keriwin: I understand your

Keriwin: I understand your point .. The question of "fairness" is a complex one. An old lady on a pension living alone and only going to the shops once a week in her only car .. is a case in point .. she may not use it every day .. true .. but it's the utility .. she wants that road running right past her door regardless of how often she uses it .. she certainly wants it there the day she does venture out in her car .. and she wants it right there and available in the event of a medical emergency .. doctor call out .. ambulance etc etc .. it's a big topic .. is it fair? .. don't know .. can't help you there ..

by steven | 12 May 12, 6:31pm

It did get off the ground, I

It did get off the ground, I paid it for a while in Wandsworth, think I was paying 130sterling a year and lambeth (loopy lefts) next door was 600 sterling per adult per household......and yes it was Marget Thatcher, she lost it on that which is sort of a shame,( a very intelligent woman and a real tory, pro looking after the planet for future generations etc) ....it was actually fair IMHO.....but got stopped after huge un-rest....I think one of her side kicks also proposed and they brought in fines for say speeding based on your income....that hurt The Tory vote as the well could get slammed for many hundreds but if you were un-employed and broke you could have a string of serious offences and pay all of 20 quid....
regards

by mist42nz | 13 May 12, 6:54am

The large majority of

The large majority of petrol/RUC tax doesn't actual end up in the national roading fund.
There was a storm in a tea cup a few years back, when it was realised the road levies and taxes were syphoned off for something else. And the funding for roads upgrades, repairs and development come from the General pool.

IIRC the reason for this is that the roads fall into "critical core infrastructure" and so "must" be covered by the core tax. Whereas levies etc, are placed to raise funds for non-core projects and specific works, so technically weren't actually allowed to be used for roading.

The detail I think was undercovered when the local councils in the Wairarapa complained about heavy used on some secondary roads (council pays more) due to the closure of the State Highway (Roading NZ, pays all). And Auckland motorway upgrades were being debated ("we pays our road tax said Aucklanders...and rest of country saying "so do we but we dont want those taxes spent in Auckland" then it came out that the road taxes weren't spent on roads anyway........)

by Hugh Pavletich | 12 May 12, 10:45am

CHRISTCHURCH

CHRISTCHURCH UPDATE......

Shape up or ship out, council told | Stuff.co.nz

Hugh Pavletich #11 8:47am

BROWNLEE BULL

The reality is that Recovery Minister Brownlee and his Government is just as much at fault as Mayor Parker and his dysfunctional Council. There is a long history to all this, going back to the time of forced Local Government amalgamation back in 1989.

Cantabrians Unite www.cantabriansunite.co.nz has spelt all this out in "chapter and verse" on its website and associated facebook page.

While the article conveys the impression Brownlee is decisive, the reality is that his bungled "top down" approach is a complete circus.

Putting Kerry Marshall in was another Key Government "kicking the can down the road" exercise. His report has been on the Local Government Ministers desk since 20 March which they are still hiding. No one can find Carter.

It was Brownlee who put in place the disastrous Regional Policy Statement 12A last September - in essence a National Government Social Cleansing Programme banning the provision of new affordable housing. No wonder the building industry here is in dire straits.

Cantabrians Unite sets out clearly with its 5 major objectives exactly what needs to be done. A recovery cannot get underway until an early local election is held to sort this Council out. The recovery can only be led by the locals, as international evidence makes blindingly obvious.

Stop playing games Mr Brownlee.

Nicholas Lynch #10 8:32am

The B-Team kowtowed to a government appointed spy who was sent down to protect the Parker Marryatt regime.

I over heard Cr. Livingstone in the chamber state verbatim, whilst grinning, "We can talk now that Kerry isn't in the room hehe."

Gutless, spineless "career" councillors. The citizens of Christchurch deserve so much better. Put the councillors back on an honourariam and see who really has the citizens interests at heart.

Nicholas Lynch www.cantabriansunite.co.nz www.facebook.com/cantabriansunite

Dalziel won't run for mayor - news - the-press | Stuff.co.nz

Hugh Pavletich
www.cantabriansunite.co.nz
www.PerformanceUrbanPlanning.org

by happyfunball | 12 May 12, 11:59am

Years ago, when in Canada I

Years ago, when in Canada I saw a sticker on a petrol pump showing a pie chart, which explained how the price of petrol was arrived at. It showed what percentage was tax, transport, profit etc. Petrol prices there are much lower than here but that didn't stop the complaints of course.
I think a similar sticker on a new house would be a good idea, to show people how much of the price was council tax, gst, building materials, labour etc. A big pie chart is easy to understand.
Your examples are eye-opening but as long as these facts are hidden in the total price, people will opine as to why the cost is so high and BS and disinformation will be the norm.

by Vera Fayed | 12 May 12, 4:42pm

mmmmmmmm,.........pie........

mmmmmmmm,.........pie..........aarrrgggghhhh

by Hugh Pavletich | 12 May 12, 6:47pm

ITS MORE THAN TAXES AND

ITS MORE THAN TAXES AND FEES...............

Knowing that starter housing stock ALL UP (serviced section and house construction) on the fringes of the affordable US cities is in the order of $US600 per square metre - here in New Zealand north of $NZ2,500 per square metre......should be clear enough.

Talking in terms of just taxes and fees is only part of the story. There is a whole lot more to it than that - being issues such as artificial land scarcity values and construction industry performance degradation as well.

The numbers in the first paragraph above "capture" these other important factors.

Hugh Pavletich
www.cantabriansunite.co.nz
www.PerformanceUrbanPlanning.org

by waymad | 12 May 12, 9:08pm

Being as how it's LTP season

Being as how it's LTP season again, it's always fun to poke yer local Clueless Council in the eye with a pointed leetle submission such as:

•I see you have budgetted for X million pesos revenue, from Development Contributions. Please set out the average revenue per section expected, segmented into residential, commercial, industrial and Gummint.
•Please provide some economic commentary about these figures, given that they are significant inputs into section prices, and coming as they do early in the development cycle, attract significant developer financing cost additions prior to section sale, and are ultimately paid for by the incurrence of household, public and business debt.
•Please provide commentary about the revenue risk implicit in these averages, focussing on the most likely such risks: development flight to cheaper jurisdictions, housing inflation, buyer resistance, disadvantagement of low-income new-house purchasers.
•Please provide a table showing comparative Development Contributions for adjacent jurisdictions, for equivalently sized Councils across New Zealand, and against a New Zealand average.

Y'see? A submission (on public record, no less), an education for Councillors who are often shocked! Shocked! to understand just what their faceless bureaucrats are inflicting on anyone enmeshed in their processes, and (best of all) a chance to stand up in front of the Council and tell these hapless fools just exactly what a dire effect they are having upon their local economy, residents and businesses.

And HappyFunBalls (is that yer Real name???) idea of a pie chart for new home owners is also a Jolly Good Idea. It's also easily legislated for: there will be a Regulation tucked away somewhere with an empowering clause which allows the relevant Minister, on the advice of certified astrologers, to do any damn thing s(he) likes.

So how's about an Itemised Bill for the householder who's just bought that beautiful new house-and-section package: vendor must, upon pain of excommunication, disclose:
- original land price (pro-rated for the section and the share of common land like roads and reserves)
- interest paid by the developer on all outgoings (again. pro-rated)
- vendor's commission
- Clueless Council Development Contribution, broken down into the Four well-beings (might as well enjoy the squirming...)
- Council and regulatory inspection fees
- Council and regulatory consent fees (will include a trades break-down, might as well use the LBP categories since they will all end up with Compliance Certificates)
- GST (but of course)
- rates paid on land between purchase and sale (shows the extent of double-dipping by the Council)
- roads
- stormwater
- sewerage
- reserves within the subdivision
- and so on.
Oh, and (silly me, I blame a crook Sav Blanc) the Hoose!
Truth in Purchasing, one could say, perhaps.
And the results won't be pretty: if'n a Developer type common tater has some of these figgers to hand (there are some partial lists in the comments already) how's about enlightening us all? Inquiring minds are waiting...

by Hugh Pavletich | 13 May 12, 4:50pm

HOUSING: GOVERNMENT STUFF UP

HOUSING: GOVERNMENT STUFF UP COSTS CALCULATION

I have always been a great fan of breaking out these costs and itemizing them - for both Local Government rates and new houses too.

When I was President for the Property Council here in the South Island back in the early 1990's, we pressed the Clueless City Council to generate itemised rates demands. Remarkably - they actually did it at the time........but only once!

We conned Bob Lineham who was the Finance Director and Geoff Barnes the Rates Manager - both fine fellows. But when the public saw this and realized just how they were being taken to the cleaners, the CCC was flooded with masses of irate ratepapers at the time.

That put a stop to itemised rates demands extremely rapidly ! Having an informed public is......well.....bureaucratic heresy.

To assist you Waymad on your.....or is it yer.....residential costs, we know the North American and NZ numbers roughly as I have outlined above. Adjusting for currency differences, it would be fair to say that NZ should not be north of $NZ1,000 per sqaure metres ALL UP for starter fringe stock (US being $US600 psm all up) - so what it highly technical terms should be labelled "Government Stuff Up Costs" are something in the order of $NZ1,500 per square metre.

So on your 200 square metre new starter fringe house, that works out at roughly $NZ300,000 of Government Stuff Up Costs,

On your 300 square metre fringe starter house about $NZ450,000 of Government Stuff Up Costs.

The poor twits would need 90% mortgages to finance this bloated price stuff, so the first example would require an additional mortgage load of about $NZ270,000......the second about $NZ405,000 of additional mortgage.

This forces the wives / partners to become "mortgage slaves". The most amusing thing to me is that many women in New Zealand today have convinced themselves how "liberated" they are! Indeed - liberated to become mortgage slaves to the Banks. No wonder so many of them are walking in to walls with exhaustion - with full time jobs and homes and kids to care for. And to think what "fun" it must be living with an excessively exhausted woman!

And heres old geezers like you and me Waymad and many others putting in countless hours pressing for affordable housing - while the young women in New Zealand are being conned in to unnecessary and excessive mortgages by the Banks.

They should of course be marching in the streets and tormenting our politicans. Their forebears did of course.

When are they going to wake up?

Hugh Pavletich
www.cantabriansunite.co.nz
www.PerformanceUrbanPlanning.org

by Hugh Pavletich | 13 May 12, 5:00pm

PRODUCTIVITY COMMISSION I

PRODUCTIVITY COMMISSION

I hd hoped the Productivity Commission would have lined upan itemized breakout of the affordable North American stuff with our stuff alingside. And too - provided information on the bond financing of infrastructure.

But alas.....all we gor was that impotent cut and paste academic stuff with little relevence to the real world.

Bur one needs to remember that bureaucrats major role is to perpetuate problems - not solve them.

by mist42nz | 13 May 12, 7:58pm

<Wipes away a tear> Hugh,

<Wipes away a tear>
Hugh, Waymad, that was beautiful thanks guys....

The problem with Government Stuff Up Tax, although being one of the closest things we've got to a Stupidity Tax, is that only thing to be done about it is, is pay more to get it examined (with no guarantees they'll do any better next time).
Generally the only thing to do with Government Stuff Up Tax is mine it for everything it's worth. Like lawyers and councils do. It's the worlds most renewable resource, and seems to be unlimited in supply. And speaking of mining the Stupidity Tax, always makes me smile when they say Aussi gets rich because of it's mining resources.....

by waymad | 13 May 12, 8:15pm

Glad to assist in a Tear Duct

Glad to assist in a Tear Duct Cleanage, misty (how apropos a moniker!).

Actually, folks, the Stuff-up Tax is much worse than that: your (yer, if'n Ah'm in HillBilly Mode) calculations are only for the initial debt.

If we apply the rule of thumb of interest paid over the full term of a loan is around equal to the principal at the start, then you're looking at double those numbers....

by Hugh Pavletich | 13 May 12, 9:18pm

SORT OUT ARTIFICIAL SCARCITY

SORT OUT ARTIFICIAL SCARCITY VALUES AND INFRASTRUCTURE FINANCING PROPERLY

A few years back Randal O"Toole referred to it as "The Planners Tax". We are talking about the samt thing as "The Government Stuff Up Tax" - roughly $300 billion of it across the New Zealand housing market, loading Kiwis up with about $75 billion of excessive mortgages in the process.

Off the top of my head with respect to Australia there is about $A2 trillion of bubble value with about $A500 billion of bubble mortgages.

Earlier I had been of the view that it would be just a matter of getting some easily understood measures and performance disciplines inculcated in to the Local Government sector - with some appropriate Central Government oversight - and bingo, we would be on the road to "housing heaven" i.e. affordable housing over a reasonable time frame (say 10 years).

I have just finished reading Chris Lee's "take" on the South Canterbury Finance billion dollar debacle.......deepening if you like my already deep distrust of Central Government oversight competence. Dont get me going on the OAG and other oversight agencies. I would be done for defamation very quickly indeed.

I have come to the view that Local Government MUST have no role to play whatsoever in "land supply" - as it is in reality simply an invitation to them to be incompetent. I touched on this within an article late last year "How housing bubbles are triggered" -

http://www.scoop.co.nz/stories/HL1111/S00011/how-housing-bubbles-are-triggered.htm

Put simply - what is required is open fringes with post development zoning, where "no go" development areas are clearly identified for solid reasons. Internally flexi zoning where those alongside a zone fringe can change use, provided they have the consent of those 50 metres further out.

And finance infrastructure with bond financing properly, along the lines of the Texas Municipal Utility District model -

http://www.performanceurbanplanning.org/files/MUD-Summary.pdf

http://www.performanceurbanplanning.org/files/MUDInfrastructureFi nancingSystem.pdf

The Local Government Losers have had 8 Annual Demographia Surveys www.demographia.com to gawk at - and it has been spelt out in the clearest possible terms that fringe new starter stock is going in to the affordable US markets ALL UP for around $US600 per square metre - here north of $NZ2,500 per square metre.

The reality is that people work for Local Authorities because in the main they are not fit for private sector employment. So the more things can be simplified for these socially and economically destructive losers the better.

It would be fair to say they are clueless about elementary public sector ethics as well. The leaders in the Loser Local Government sector have had near 8 years to figure out that denying people the opportunity to affordable housing is a serious breach of basic human rights.

There is no way artificial scarcity values and inappropriate infrastructure financing can be justified - and it is well past time Central Government came down hard on these issues. Just tinkering and tweaking legislation is not the answer.

Local Government will only perform to an acceptable standard, when the appropriate structural changes are made.

Hugh Pavletich
www.cantabriansunite.co.nz
www.PerformanceUrbanPlanning.org

by robby217 | 13 May 12, 1:44pm

Olly, are you on performance

Olly, are you on performance bonus for 200+ comments? If so I just brought up the double century for ya. If not tell BH to loosen the purse strings.

by Gummy Bear Hero | 13 May 12, 2:03pm

201 ! ...... that's

201 ! ...... that's indicative of the Kiwi love affair with houses as investments ....

... try mentioning something constructive here , such as manufacturing ...... big yawn from the gang ..... you may attract comments from the resident " peak oil " brigade .......or Walter & Les ( if you're so lucky ) ..... otherwise , zippo ....

by mist42nz | 13 May 12, 3:38pm

Manufacturing? Remember that

Manufacturing?

Remember that "dragons den" program on TV?
The clear majority were looking for funding to go offshore for manufacturing to be price competitive.
So whats left to discuss, setting up something competitive in NZ, with the resources available to NZers? nope.
Globalisation has levelled the local shipping advantages on all but bulk (a friend recently needed some computer programmers, able to handle cellphone apps. for his production and research he ended up working with Sri Lankians. Local uni just went "huh?")

Also if you're going to export the product, and you dont have to produce it in NZ (eg not agriculture). Then why make it here? With our ports costs and problems? bah - better to make it in Asia, and use a thick heavy shipping company already going your way.

Or make a local product to sell to the local "mexicans with cellphones"? Where's your distribution chain? It's been sold to the big foreign chains who *might* buy in but the likes of P&G and Ww are famous for screwing over little suppliers. And these people far more interested in flashy imports anyways....

by Kunst | 13 May 12, 4:25pm

mist42nz - we have no decent

mist42nz - we have no decent jobs for our well educated NZyoungsters.

Change the mindset and culture of manufacturing.
http://www.cadalyst.com/manufacturing/the-changing-manufacturing-culture...

by mist42nz | 13 May 12, 7:11pm

YES exactly!!! There is no

YES exactly!!!

There is no money in manufactureing in NZ. Just as tired gold fields occured after the rush.

And like the gold fields the New Market is in selling stuff to the hopefulls. The hopefuls can be encouraged to put plans together and run to bankers for credit notes and even pay for commision of share releases and to get loans from finance companies.
Then they pay the consultants who run around waving flags and shouting rah-rah-rah. And they get paid with OPM. And the accountants and lawyers and managers and fund supervisors all get their fees.....

And if it's a low volume niche, with modest skill requirements and not worth setting up a full line for... perhaps NZ might be able to handle it. And admittedly there are some amazingly expert manufacturers in NZ (a metal fabrication house in Wanganui springs to mind. as do the electronic spots in Marton, and a chem house in Wellington) but they are real specialists well beyond the expertise shown by their peers or public. (and costing way above what most NZ firms could afford on an average run - but still cheap compared to setting up a full run on an single US or Asian line)

by Kunst | 13 May 12, 11:03pm

mist42nz – I recommend to

mist42nz – I recommend to read the link above. A solid manufacturing sector has positive implications on any economy.
In which sectors could New Zealand create decent jobs for the youngsters, the wider NZpopulation to lift production and reduce our account deficit ?

by mist42nz | 14 May 12, 7:44am

Kunst. I have read it. twice

Kunst. I have read it. twice to be sure before I replied.

And it's all stuff I've heard before. Many times.
Sometimes from managers, sometimes from real estate agents, often from consultants (hence my comment about the consultants making the "supply the gold miners" profits).

And I used to hear that kind of stuff on my Amway tapes all the time. (c.f. gold miners).

To enter into manufacturing you need a distribution outlet and a profitable product.

Why have Allflex, Glaxo, & the cartonmaking chain whose name slips my mind even though I did 6 months on their line) all shifted overseas.......

by Kunst | 14 May 12, 12:09pm

mist42nz - as many nations

mist42nz - as many nations demonstrate, to enter manufacturing and succeed you need the right culture. This is a process over years/ decades and doesn’t just happening.
Interesting you didn't answer my question about employment.

by mist42nz | 14 May 12, 12:51pm

Still need customers.

Still need customers. "Culture" happens everywhere but without tradeable resources their is no market to ship manufactured goods to. Like we could ship them to the third world, poverty places, they have consumers but not tradeable wealth.
Why setup manufacturing then? Investors aren't going to do it, because they need the sales to give yield and ROI, else they'll try and scrape yield together somewhere else.

So they need demand. (to create a market, first)
and next the market needs liquidity of some form (as median of exchange)

So we could go a reverse-Nordic system and have the government issue money (eg corn) to the masses (eg subsides to diary farms in the 50s-70s) in order to develop a grassroots economy. Hopefully encouraging the people to make use of the trading advantage that having money creates. BUT. They will have to learn to avoid the nets that are set by the already rich, and the hooks of the advertisers and foreign devils.

It would also mean the initial money supply must be created out of nothing - pegged only by it's future trade value. Otherwise it will simply inflate.

However time has proven that most people would rather spend and borrow, than to be prudent. So such a system is likely to "go ghetto"

I thought I answered the question about employment elsewhere.
I stand by the market. If there are no real jobs or no real income, then I see no issue with unemployment. Because to fight unemployment by contorting the market will just end up destroying it's stability and create, what is known in water pump terms as "cavitation".
The part I find interesting that an unemployed person, a judge and a politician create the same amount of value add - so why the differences in pay cheque? Indeed a food bank and pannier-carriers probably provide more necessity (demand) and real value add product than any of the other 3, so why do they get little to nothing?
And if politicians and judges get paid massives sums for producing no real value add (ie the money they're paid is underpinned by nothing) then why not give more to basic jobs. And why would anyone give it to bankers, who need it less than most, create negative value add (inflation), and generally take it out of circulation (personal consumption, usually into graveyards of "bank-money")

by Hugh Pavletich | 13 May 12, 4:54pm

Robby217 - good point. With

Robby217 - good point. With this high hit / response volume Olly will be no doubt pressing Bernard for the Michael Lewis rate.......which I understand is in excess of $US10 per word !

by MortgageBelt | 13 May 12, 2:06pm

Property is King.

by Gummy Bear Hero | 13 May 12, 4:04pm

Thank God for that !

Thank God for that ! ..

...... I was crapping my Gummy nappies that one day Camilla's old man Charles would become King ....

Long live King Property ...... Amen !

by Kunst | 13 May 12, 3:17pm

Wow - I heard of a $ 140.-

Wow - I heard of a $ 140.- increase in rent p/m - for a small retail shop.

Considering the increasing difficult economic circumstances worldwide and the fact that high numbers of small (retail) businesses and tenants are on the verge of financial collapse – I have three questions:

Depending on contracts - when insurance, rates, taxes, etc. go up and property owners pass these on to their business lessee, who have reduced incomes/ profits – how does that work until businesses are collapsing ?

Depending on contracts - when insurance, rates, taxes, etc. go up and property owners pass these on to their tenants, who have reduced/ stagnating incomes – how does that work until tenants are stressed to the limit ?

How much, under fair circumstances can be negotiated and how many cases exist, where both parties are under stress or/ and stubborn ?

Looking into the situation of smaller communities - I suspect there are already massive property owner vs. lessee/ tenant wars brewing.

New Zealand has about 52’000 retail shops.

http://www.stats.govt.nz/browse_for_stats/industry_sectors/RetailTrade/RetailTradeSurvey_HOTPDec11qtr/Data%20Quality.aspx#population

by mist42nz | 13 May 12, 4:26pm

If you start pushing down the

If you start pushing down the rental prices on commercial leases where do you stop?

You charge a market competitive rate, the company decides wither it is viable and worth the location, or goes elsewhere. Your rate should reflect the costs of the building, the resources needed to improve it, the goodwill caused by local services (generally constant or slow changing, so usually reflected in the purchase price, and the cost of servicing the debt.

That is the income for the building. It is just as much a commercial entity as a retail shop or other business.

So if the market is getting harder, why should the building business subsidise their customers businesses?

If the building business lowers its prices it creates pricewar competition with others offering similar local services - it also reduces the value of its core asset (ability to rent asset over time). This could result in established competing businesses who have paid most or all of their building off - or deep pocketed consortiums or foreign investors - also sponsoring their customers. And quit easily keeping the margins down or negative, until their customers have dominant market edge. And those owning nearby commercial buildings would have all their customers screaming because their rents can't go as low. The small retailers and consultants officers wouldn't be able to drop margins as far as competitors in paid-off buildings. The paid off buildings could go "mall" and do primary marketing to futher attract business away from their competitors and into their customers businesses.

Is that really what you want?

Likewise such rent holidays seldom result in good news. Frequently the reason is not that the small business is effected by market conditions - far far more often it is from the inability to read the market or from poor business choices (eg buying expensive under utilised equipment, or staff with poor attititude, or bosses more interested in their lifestyle than their business). In such cases the business is floundering - but giving these people more rope, is like giving teenagers a credit card. Because they haven't remedied the inital problem, giving them part of the businesses cashflow, just allows them to relax even more, to make more of the same mistakes.
Frequently it's those who overcome the market issues, that build the stronger business because of the skills they aquired overcoming the challenges. It's that adaption which makes them better business people. Failure to be able to adapt...well all it would do is delay the inevitable.

And the final case, is where the business owner accepts some form of security or share in exchange for the relief. Often this means the landlord must then chase for dividends or repayment, as well as chasing for rent. And they're seen as an even bigger asshole because they end up owning even more of the business...and sometimes end up responsible for the failing business' other costs (Leased equipment, unpaid wages.)

Far better to put the onus of the market pressure on the small business. Encourage the small business owner to speak to a accountant and marketter. And if it's going to fold, let it do so earlier, so other tenants may take the space.

<caveat: personal experiences/nda's>

by mist42nz | 13 May 12, 4:30pm

Oh also - if you give one

Oh also - if you give one tenant rent relief, you can bet your boots the others will get to hear about it.

And those in the worst trouble, will scream the loudest if you don't help THEM. (because their case is -always- special)

The best option is to get help FAST. and if things are looking like the market IS collapsing. see about getting a quick release from the lease (ie a new tenant, as fast as possible). Before thousands of dollars worth of arrears build up, which they quickly do. And the debt burden makes everyones live and sleep much much harder (And business recovery almost impossible)

by mist42nz | 13 May 12, 7:14pm

Opps forgot the

Opps forgot the obvious:

Also once you've done it once, it becomes easier to expect it in the future. And harder to deny in the future without causing negative feelings (because its really -really- bad this time, and its just this once. more.).

by Kunst | 13 May 12, 11:04pm

Why is doing business a

Why is doing business a battlefield between parties here in NZ ? - the last thing we need right now.

Mist42nz – in most of your articles I recognise a strong attachment to the "Anglo- Saxon" model of doing business. While I see some merits, I think the model is old fashion and does in today’s difficult and complex world in general a lot of damage. I rather see solutions following the “Rhine capitalism” or the “Nordic” model.

by mist42nz | 13 May 12, 11:38pm

I don't choose it or it's

I don't choose it or it's cultural heritage.
I observe and note the effects of resources and currency, and describe the flow from there.

In the case of commercial rents, the information is from rentals I and my family have been involved with and their mentors.

Why is it a battle? Because when we looked at dropping rent to help a struggling tenant, the neighbours got wind (how??) and made it bloody obvious that should we reduce prices or proceed to set this precedent they would see us (and any remaining tenants) priced out of business.
I have also noticed it elsewhere in product supply businesses I have been party to. Modems used to have good margin, and thus good suport could be afford to purchasers. A grey importer setup a minimal cost-plus structure that competed with it. The importer put the hard word on the grey importer, put your prices up or we will push you out; and explained that a price war and skeleton margins left nothing to develop the business on or pay wages with. The grey importer agreed to compromise, and they both did well. Likewise with video renting shops, if they don't hold their prices at reasonable levels, and start to compete on price everyone loses - how do I know? Because I saw it, predicted it, had the steps detailed by a mentor at the time, ticked every box as the three shops drove each other into the ground. One thought he could met his breakeven figure by offering new rentals a little cheaper - didn't realise that he was fishing in a price sensitive shallow pond, he got a burst of customers, reinvested in more stock. His competitor lost business and had to protect his own investment, dumped half his old stuff, reinvested in the newest and matched on price. The first guy, now had slightly dated shelf stock so brought the latest at full price thinking he had customer loyalty. But the second guy had matched him on price - and the second was late to market with the same movies (half a sale cycle behind). To cover his loss, he cut prices. Which actually put him under cost but he needed the revenue for that last batch. That left the other guy with very few sales on his recent stock. So one was selling lots at a loss (losing money) and the other was selling a full price but not enough turnover (losing money).
The third one brought the ditched movies, and a few extras. They were dirt cheap, but the other two drove the local market price so far down, even he couldn't make a enough to cover staff and damages (he had ultra cheap movies, but you could get latest movies for 1.50 more, so his overheads killed him).

It's not theory. That *IS* the reality of the market.

by mist42nz | 13 May 12, 11:42pm

Also of the Scandanavians I

Also of the Scandanavians I know, who tend to be on the younger side. I very much disagree with their socialist system, which seems to have a lot in common with Feudalism, only with State/Baron controlled media.

by robby217 | 14 May 12, 1:10am

Quite alot of justifications

Quite alot of justifications in all of the above for why rents can't fall. Curious really.
http://www.abc.net.au/news/2012-04-27/receiver-takes-court-action-to-acc...
Take this for example, now what is the landlord going to do with his great big warehouse if the company went under?

by steven | 14 May 12, 7:18am

Exactly, in 2000 I worked for

Exactly, in 2000 I worked for a small IT firm who struggled, the landlord demanded the rent every month and indeed wanted increases we really struggled to pay it.....when I left it folded, the property was empty for 18+ months....that is I think coming in greater quantities.....
regards

by Kunst | 14 May 12, 11:29am

Correct Steven – I see a lot

Correct Steven – I see a lot of empty shops, not just for a month, but a longer period of time – clear signs of failed business practice among negotiating parties.

by mist42nz | 14 May 12, 7:37am

Mr Babbage, what happens if I

Mr Babbage, what happens if I put the wrong information in?

The landlord is a business like any other. And commercial property is no different from anything else.

What does happen if the great big warehouse charges more than the customers can afford?
Same as any other business, eventually they run out of reserves and fold/sell. (and hopefully the new folks will be able to attract customers, or the others will adjust their rates.)

See it's about the contracts you offer - that's the shelf price.
If there's a couple of holidays or escape points - but not so much to be anti-competitive to the market then that's just sales negoiation. Likewise a landlord will want to set the highest price they can get - but without killing the golden goose where they want to set that shelf price low to attract the customer. Too low and they're $2 shop without the turnover.

What will they do with the warehouse. They'll keep paying the mortgage and rates. Just like a retailer will or a resy will. And hopefully they'll have an available service that they'll be able to sell. eventually.
But to keep cutting shelf prices until the product moves. It's tempting but it -will- put you in a price war. And the majority of tenants -will- end up in that situation again (usually through poor financial handling).

Thus better an empty warehouse full of opportunity, than to sell at under cost and have no opportunity. You think the landlords bill is what's going to be on top of the deferred payments list -if- the economy picks up????

by Kunst | 14 May 12, 12:04pm

Considering the worldwide

Considering the worldwide economic prospects, New Zealand business will struggle, bankruptcies increase and employment with decent jobs will be the task of the nation.
Mist42nz – under that scenario and the way you describe your policies as a commercial property owner - I think you are on the wrong path.

by mist42nz | 14 May 12, 1:16pm

I don't own the commercial

I don't own the commercial properties. I have ties to those who have. hence the <caveat: personal experience and ndas> I am involved, but it's not my story to tell (details of).
The people who are doing this stuff, and who I'm talking about know their industry and have been successfully doing for many many years.
The retail descriptions are from businesses I have been involved in personally and have personal knowledge of what occurred.
And yes it will be messy.
But that's why the warnings were given much earlier and the writing was all over the wall. But it was ignored. Just as protests about the Crafar sales and Asset sales have been ignored, and the foreign ownership and borrowing objections were ignored. Just as certain professors warned about global collapse and the problems of certian metrics, and were ignored.

The days of "decent jobs" are gone.
The market is tilting from mature to decline. All the signs are there.
So do we copy Rome, or do we find the answers in time. Do we look to our own profits and trust government to see us right as they never have before, or are we adapting and engineering the answers we need, before things get too bad.

Hint: where I live; I can grow a garden, and fresh water is pletiful.

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